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93–636 PDF 2015

PPACA IMPLEMENTATION: UPDATES FROM CMS AND GAO

HEARING BEFORE THE

SUBCOMMITTEE ON OVERSIGHT AND

INVESTIGATIONS OF THE

COMMITTEE ON ENERGY AND

COMMERCE

HOUSE OF REPRESENTATIVES

ONE HUNDRED THIRTEENTH CONGRESS

SECOND SESSION

JULY 31, 2014

Serial No. 113–170

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COMMITTEE ON ENERGY AND COMMERCE

FRED UPTON, Michigan Chairman

RALPH M. HALL, Texas JOE BARTON, Texas

Chairman Emeritus ED WHITFIELD, Kentucky JOHN SHIMKUS, Illinois JOSEPH R. PITTS, Pennsylvania GREG WALDEN, Oregon LEE TERRY, Nebraska MIKE ROGERS, Michigan TIM MURPHY, Pennsylvania MICHAEL C. BURGESS, Texas MARSHA BLACKBURN, Tennessee

Vice Chairman PHIL GINGREY, Georgia STEVE SCALISE, Louisiana ROBERT E. LATTA, Ohio CATHY MCMORRIS RODGERS, Washington GREGG HARPER, Mississippi LEONARD LANCE, New Jersey BILL CASSIDY, Louisiana BRETT GUTHRIE, Kentucky PETE OLSON, Texas DAVID B. MCKINLEY, West Virginia CORY GARDNER, Colorado MIKE POMPEO, Kansas ADAM KINZINGER, Illinois H. MORGAN GRIFFITH, Virginia GUS M. BILIRAKIS, Florida BILL JOHNSON, Ohio BILLY LONG, Missouri RENEE L. ELLMERS, North Carolina

HENRY A. WAXMAN, California Ranking Member

JOHN D. DINGELL, Michigan FRANK PALLONE, JR., New Jersey BOBBY L. RUSH, Illinois ANNA G. ESHOO, California ELIOT L. ENGEL, New York GENE GREEN, Texas DIANA DEGETTE, Colorado LOIS CAPPS, California MICHAEL F. DOYLE, Pennsylvania JANICE D. SCHAKOWSKY, Illinois JIM MATHESON, Utah G.K. BUTTERFIELD, North Carolina JOHN BARROW, Georgia DORIS O. MATSUI, California DONNA M. CHRISTENSEN, Virgin Islands KATHY CASTOR, Florida JOHN P. SARBANES, Maryland JERRY MCNERNEY, California BRUCE L. BRALEY, Iowa PETER WELCH, Vermont BEN RAY LUJAN, New Mexico PAUL TONKO, New York JOHN A. YARMUTH, Kentucky

SUBCOMMITTEE ON OVERSIGHT AND INVESTIGATIONS

TIM MURPHY, Pennsylvania Chairman

MICHAEL C. BURGESS, Texas Vice Chairman

MARSHA BLACKBURN, Tennessee PHIL GINGREY, Georgia STEVE SCALISE, Louisiana GREGG HARPER, Mississippi PETE OLSON, Texas CORY GARDNER, Colorado H. MORGAN GRIFFITH, Virginia BILL JOHNSON, Ohio BILLY LONG, Missouri RENEE L. ELLMERS, North Carolina JOE BARTON, Texas FRED UPTON, Michigan (ex officio)

DIANA DEGETTE, Colorado Ranking Member

BRUCE L. BRALEY, Iowa BEN RAY LUJAN, New Mexico JANICE D. SCHAKOWSKY, Illinois G.K. BUTTERFIELD, North Carolina KATHY CASTOR, Florida PETER WELCH, Vermont PAUL TONKO, New York JOHN A. YARMUTH, Kentucky GENE GREEN, Texas JOHN D. DINGELL, Michigan (ex officio) HENRY A. WAXMAN, California (ex officio)

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C O N T E N T S

Page Hon. Tim Murphy, a Representative in Congress from the Commonwealth

of Pennsylvania, opening statement ................................................................... 1 Prepared statement .......................................................................................... 3

Hon. Diana DeGette, a Representative in Congress from the State of Colo-rado, opening statement ...................................................................................... 4

Hon. Michael C. Burgess, a Representative in Congress from the State of Texas, opening statement .................................................................................... 6

Hon. Henry A. Waxman, a Representative in Congress from the State of California, opening statement ............................................................................. 7

Hon. Fred Upton, a Representative in Congress from the State of Michigan, prepared statement .............................................................................................. 85

Hon. G.K. Butterfield, a Representative in Congress from the State of North Carolina, prepared statement ............................................................................. 86

WITNESSES

Andrew Slavitt, Principal Deputy Administrator, Centers for Medicare and Medicaid Services ................................................................................................. 9

Prepared statement .......................................................................................... 11 Answers to submitted questions ...................................................................... 90

William T. Woods, Director, Acquisition and Sourcing Management, Govern-ment Accountability Office .................................................................................. 60

Prepared statement .......................................................................................... 63 Answers to submitted questions ...................................................................... 95

SUBMITTED MATERIAL

Democratic Staff Report of July 2014, ‘‘Benefits of the Health Care Reform Law,’’ Democratic Committee Members’ Districts, 1 submitted by Ms. DeGette ................................................................................................................. 5

Democratic Staff Report of July 2014, ‘‘Benefits of the Health Care Reform Law,’’ Republican Committee Members’ Districts, 1 submitted by Ms. DeGette ................................................................................................................. 5

Article of July 17, 2014, ‘‘Health Care Coverage under the Affordable Care Act–A Progress Report,’’ by David Blumenthal and Sara R. Collins, The New England Journal of Medicine, submitted by Mr. Green ........................... 37

Article of July 23, 2014, ‘‘Health Refom and Changes in Health Insurance Coverage in 2014,’’ by Benjamin D. Sommers, Thomas Musco, Kenneth Finegold, Munira Z. Gunja, Amy Burke, and Audrey M. McDowell, The New England Journal of Medicine, submitted by Mr. Green ........................... 44

Majority memorandum, submitted by Mr. Murphy .............................................. 87

1 The fact sheets have been retained in committee files and also are available at http://docs.house.gov/Committee/Calendar/ByEvent.aspx?EventID= 102587.


http://docs.house.gov/Committee/Calendar/ByEvent.aspx?EventID=102587



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PPACA IMPLEMENTATION: UPDATES FROM CMS AND GAO

THURSDAY, JULY 31, 2014

HOUSE OF REPRESENTATIVES, SUBCOMMITTEE ON OVERSIGHT AND INVESTIGATIONS,

COMMITTEE ON ENERGY AND COMMERCE, Washington, DC.

The subcommittee met, pursuant to call, at 9:19 a.m., in room 2123 of the Rayburn House Office Building, Hon. Tim Murphy (chairman of the subcommittee) presiding.

Members present: Representatives Murphy, Burgess, Blackburn, Gingrey, Harper, Gardner, Griffith, Johnson, Ellmers, DeGette, Braley, Schakowsky, Castor, Tonko, Yarmuth, Green, and Waxman (ex officio).

Staff present: Mike Bloomquist, General Counsel; Sean Bonyun, Communications Director; Matt Bravo, Professional Staff Member; Leighton Brown, Press Assistant; Karen Christian, Chief Counsel, Oversight and Investigations; Noelle Clemente, Press Secretary; Brad Grantz, Policy Coordinator, Oversight and Investigations; Brittany Havens, Legislative Clerk; Sean Hayes, Deputy Chief Counsel, Oversight and Investigations; Emily Newman, Counsel, Oversight and Investigations; Jean Woodrow, Director of Informa-tion Technology; Phil Barnett, Democratic Staff Director; Peter Bodner, Democratic Counsel; Brian Cohen, Democratic Staff Direc-tor, Oversight and Investigations, and Senior Policy Advisor; Lisa Goldman, Democratic Counsel; Elizabeth Letter, Democratic Press Secretary; Karen Lightfoot, Democratic Communications Director and Senior Policy Advisor; and Matt Siegler, Democratic Counsel.

OPENING STATEMENT OF HON. TIM MURPHY, A REPRESENTA-TIVE IN CONGRESS FROM THE COMMONWEALTH OF PENN-SYLVANIA

Mr. MURPHY. Good morning. I convene this hearing of the Sub-committee on Oversight and Investigations to review the imple-mentation of the Patient Protection and Affordable Care Act. Our first witness this morning, Mr. Andy Slavitt, the Principle Deputy Administrator at the Centers for Medicare and Medicaid Services. This is Mr. Slavitt’s first testimony as a CMS employee, but not his first appearance before this subcommittee. Some of you may recall that Mr. Slavitt appeared before us last October to testify on behalf of one of the contractors who built the Healthcare.gov site. So wel-come back.

Our ongoing concern about Healthcare.gov is one of the reasons that we are holding this hearing today. Exactly 1 year ago this


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week, members of this committee will remember that we heard from CMS Administrator Tavenner who told us that Healthcare.gov would be ready on October 1. We were told that it would work, everything we be fine. And later, we found out that that wasn’t quite the same thing. In fact, the contractors told us the same thing, that it would be working.

Our reviews of the Web site were brushed aside. But we know how our fears of a massive flop were well-founded. The rollout of the Affordable Care Act was an unmitigated disaster. I think ev-erybody agrees with that.

So, Mr. Slavitt, we are hoping to hear from you today candidly and honestly about how things are progressing. And, frankly, we hope we hear with the same candor from you as an administration official that we heard last fall when you testified on behalf of QSSI, the company that built the hub for Healthcare.gov.

Mr. Slavitt’s new role also comes at an opportune time for the administration to address the systemic problems that led to the Healthcare.gov disaster. After Mr. Slavitt’s testimony, we will hear from William Woods with the Government Accountability Office. Today, the GAO has released a review of the failed October 1 launch of Healthcare.gov, confirming what this committee learned during its own review of the Web site, the administration didn’t have the expertise, couldn’t meet deadlines and didn’t have the leadership or organizational skills to manage this massive under-taking. And GAO also has given us a price tag for this boondoggle, a broken Web site that the President promised would be as easy to use any an ecommerce site, cost the taxpayers nearly $1 billion. That took a lot of taxpayers’ money from their hard-earned pay-checks to come up with that 1 billion, and many taxpayers aren’t happy about that.

We will also hear from the GAO that these costs are still going up. Some of my colleagues may whine and complain that we are spending too much time examining the failed Web site launch. I am not surprised. They don’t want to talk about it. But the reality is these problems are still playing out, and may impact this fall’s open enrollment period.

We still do not know if the administration has a system in place capable of handling inconsistencies, inaccurate subsidies, web secu-rity, or whether CMS will ever put in place a functioning payment system.

We will ask today about the Healthcare.gov contracts and the GAO report. But as we head into open enrollment this fall, patients and families need to know how this law will affect them because, each day, the ACA is making our healthcare system more expen-sive, fragmented, and restrictive.

Earlier this summer, insurers were required to notify the admin-istration plans for premium rates in 2015. We hope that witnesses today will provide information on the rates that have been sub-mitted, when the public will know them with enough time to plan for their purchase, and whether the public will ever see $2,500 in savings that the President promised.

Speaking of promises, we also want to know if Americans will be able to keep their doctor and if they were able to keep their plan if they liked it. Earlier this year, this committee heard testimony


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from representatives of the insurance industry who noted that the requirements in the healthcare law required the cancellation of millions of policies. We hope to hear whether the administration predicts widespread cancellations and uncertainty again this fall.

And it is not only individual plans that we are concerned about. Last week, the IRS finally began releasing information related to the enforcement of the employer mandate. This may be surprising to many. The administration has after all delayed this several times. But it certainly raises questions about what will happen when one of the law’s most controversial pieces finally goes into ef-fect.

Finally, I remain concerned about the overall impact of this law. Millions of Americans had their health insurance cancelled because of the law only to find that the plans they are now forced to buy are much more expensive in premiums, copays, deductibles or all the above. Some people may qualify for subsidies and others do not. At the same time, the law’s massive cost and destructive impact on the economy will continue to be felt for years.

I again thank both the witnesses for testifying. [The prepared statement of Mr. Murphy follows:]

PREPARED STATEMENT OF HON. TIM MURPHY

Our first witness this morning is Mr. Andy Slavitt, the Principal Deputy Adminis-trator at the Centers for Medicare and Medicaid Services. This is Mr. Slavitt’s first testimony as a CMS employee, but not his first appearance before this sub-committee—some of you may recall that Mr. Slavitt appeared before us last October to testify on behalf of one of the contractors who built HealthCare.gov.

Our ongoing concern about HealthCare.gov is one of the reasons that we are hold-ing this hearing today. Exactly 1 year ago this week, members of this committee will remember that we heard from CMS Administrator Tavenner, who told us that HealthCare.gov would be ready on October 1. The contractors told us the same thing. Our reviews of the Web site were brushed aside, but we know how our fears of a massive flop were well-founded. The roll-out of the Affordable Care Act was an unmitigated disaster. So, Mr. Slavitt, we hope to hear from you today about how things are progressing—and frankly, we hope to hear the same candor from you as an administration official that we heard last fall when you testified on behalf of QSSI, the company that built the hub for HealthCare.gov.

Mr. Slavitt’s new role also comes at an opportune time for the administration to address the systemic problems that led to the HealthCare.gov disaster. After Mr. Slavitt’s testimony we will hear from William Woods with the Government Account-ability Office. Today, the GAO has released a review of the failed October 1st launch of HealthCare.gov confirming what this committee learned during its own review of the Web site: The administration didn’t have the expertise, couldn’t meet deadlines, and didn’t have the leadership or organizational skills to manage this massive un-dertaking. And GAO also has given us a price tag for this boondoggle. A broken Web site that the President promised would be as easy to use as any e-commerce site cost the taxpayers nearly $1 billion. And we’ll also hear from GAO that these costs are still going up.

Some of my colleagues may whine that we’re spending too much time examining the failed Web site’s launch. I’m not surprised they don’t walk to talk about it, but the reality is these problems are still playing out and may impact this fall’s open enrollment period. We still do not know if the administration has a system is in place capable of handling inconsistencies, inaccurate subsidies, or whether CMS will ever put in place a functioning payments system.

We will ask today about HealthCare.gov contracts and the GAO report, but as we head into open enrollment this fall, patients and families need to know how this law will affect them because each day, the ACA is making our health care system more expensive, fragmented, and restrictive. Earlier this summer, insurers were re-quired to notify the administration of plans for premium rates in 2015. We hope the witness today will provide information on the rates that have been submitted, when the public will know them with enough time to plan for their purchase, and whether the public will ever see the $2,500 in savings that the President promised.


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Speaking of promises, we also want to know if Americans were able to keep their doctor and if they were able to keep their plan if they liked it. Earlier this year, this committee heard testimony from representatives of the insurance industry who noted that the requirements in the health care law required the cancellation of mil-lions of policies, and we hope to hear whether the administration predicts wide-spread cancellations and uncertainty again this fall.

And it is not only individual plans that we are concerned about. Last week the IRS finally began releasing information related to the enforcement of the employer mandate. This may be surprising to many—the administration after all has delayed this several times—but it certainly raises questions about what will happen when one of the law’s most controversial pieces finally goes into effect.

Finally, I remain concerned about the overall impact of this law. Millions of Amer-icans had their health insurance cancelled because of the law, only to find that the plans they are now forced to buy are much more expensive. Some people may qual-ify for subsidies, others do not. At the same time, the law’s massive cost and disrup-tive impact on the economy will continue to be felt for years. I again thank both the witnesses for testifying and now recognize the ranking member for 5 minutes.

Mr. MURPHY. And now recognize the ranking member for 5 min-utes.

OPENING STATEMENT OF HON. DIANA DEGETTE, A REP-RESENTATIVE IN CONGRESS FROM THE STATE OF COLO-RADO

Ms. DEGETTE. Thank you so much, Mr. Chairman. Well, I have got to say, I don’t really think we could go on August recess with-out having another hearing on the Affordable Care Act, because this is now the twelfth one we have had in the last 10 years. As I have been saying the last couple years, the ACA Oversight is a really important topic, but I would feel a whole lot better if we were actually doing oversight on what is happening now with the ACA instead of just rehashing old issues over and over again.

You are right. We will stipulate the rollout of the ACA was an unmitigated disaster. But I guess I would like to know how long we are going to keep beating this drum? Because when you look at what has happened since the unmitigated disaster of the rollout, things are actually improving. And just about every prediction that was made about the law has turned out to be wrong once we got going. So I think we should spend our time trying to figure out how to make the law work even better for the millions of Americans who are now enrolling and getting health insurance.

So in the last year, we had hearings where the majority insisted that Americans would be hit by insurance rate shock. Instead, the majority of new enrollees in ACA coverage are paying less than $100 a month. The majority insisted that the broken Healthcare.gov Web site would never be fixed, but thank goodness it was. And millions of Americans used it to sign up for coverage. They insisted that many Americans would not pay for coverage once they signed up. But the insurers all came in here and told us that was not correct that people in fact were paying. They insisted that 2015 premiums would skyrocket. But again, that is proving not to be true. In fact, in many cases, enrollees will be able to re-duce their premiums next year. They insisted that Americans did not want or need health insurance coverage. But over 20 million Americans have received coverage under the ACA, and the un-in-surance rate has dropped precipitously since January. The vast majority of new enrollees are happy with their plans.


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1 The fact sheets have been retained in committee files and also are available at http:// docs.house.gov/Committee/Calendar/ByEvent.aspx?EventID=102587.

Now, these are important facts, Mr. Chairman. And in the inter-est of making the hearing as fact-based as possible, I want to talk about some fact sheets released earlier today by the Energy and Commerce Democratic staff on the benefits of the Affordable Care Act in every congressional district in the country. I would ask unanimous consent to enter the fact sheets for each committee member into the record, Mr. Chairman.

Mr. MURPHY. Without objection, so ordered. 1 Ms. DEGETTE. Thank you. And I just want to talk about some

of the benefits of the law in my home State of Colorado. In Colorado, there are 240,000 State residents who were pre-

viously uninsured but who now have quality affordable health cov-erage because of the Affordable Care Act. In Colorado, our unin-sured State residents has declined by about a third. Almost 2.1 mil-lion people in Colorado, including 460,000 children and 860,000 women, now have health insurance that covers preventative serv-ices without any copayments or deductibles. Fifty thousand young adults in Colorado retained health coverage through their parent’s plans. More than 40,000 seniors have received Medicare Part D drug discounts worth $118 million. 1.8 people in Colorado are pro-tected by ACA provisions that prevent insurance companies from spending more than 20 percent of their premiums on profits and administrative overhead. Because of these protections, over 210,000 individuals in the State received approximately $41.7 million in in-surance company rebates. Up to 294,000 children in Colorado with preexisting health conditions can no longer be denied coverage by insurers.

So even if you disagree with the law, it is important to note that the ACA is helping our constituents. I hope we can end these re-lentless attacks and we can help more constituents obtain coverage under the law.

We should look at the example for Medicare Part D. I can attest to it, because I was here. Many Democrats, including me, did not vote for the law and had real concerns about how it was imple-mented. But we still had town hall meetings and other events so that our seniors got coverage that cut their drug costs. I hope we can work, as we look into the next year, in a bipartisan way to make the ACA even better, instead of trying to find ways to under-mine and repeal it.

Now, I appreciate the witnesses coming today. I know GAO has some important insights into CMS contracting for Healthcare.gov. And anything we can do to improve that contracting is good for me. I hope CMS has learned from the Web site’s flawed launch. And I want to know the plan to make sure they do better moving for-ward.

And I want to welcome you, Mr. Slavitt. You are new to CMS. You will have primary responsibility for the Web site. So I hope you can tell us what you plan to do in 2015.

Thank you, Mr. Chairman. Mr. MURPHY. The gentlelady’s time has expired. I now recognize

Dr. Burgess for 5 minutes.




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OPENING STATEMENT OF HON. MICHAEL C. BURGESS, A REPRESENTATIVE IN CONGRESS FROM THE STATE OF TEXAS

Mr. BURGESS. I thank the chairman for the recognition, thank Mr. Slavitt for joining us here again at our subcommittee.

You know, throughout the development and the rollout of Healthcare.gov, this subcommittee had repeated assurances that the systems were and would be ready to go, and that the implanta-tion was on track. At a hearing in September, literally days before the October 1 launch of Healthcare.gov, we had repeated assur-ances from the then director of the Center for Consumer Informa-tion and Insurance Oversight, Mr. Gary Cohen. He said unambig-uously that on October 1, Americans would be able to go online, would be able to see premium net of subsidy, and would be able to sign up. We all know now that those assertions were fact-chal-lenged.

The Center for Medicare and Medicaid Services undertook this mammoth project without effectively planning for its development or its oversight. This has led to hundreds of millions of taxpayer dollars being wasted. Again, Gary Cohen and other HHS officials told us time and again that the Web site was working. That was factually incorrect. It was not working. And it still may not be working, because the back-end systems, those systems that are re-sponsible for actually paying providers, have not been built.

Consumers may believe the Web site is fixed because some of the frontend problems have been addresses. But there is no way to verify inaccuracies about things like citizenship and income level, or insure that the correct subsidies are being paid for insurance premiums.

Thanks to this investigation, we now have definitive proof that the Department of Health and Human Services was fully aware that these systems were not ready for prime time. Their own con-tracting documents show that they only expected 65 percent of the Federal exchange to be ready on October 1. And then, of course, we are continuously reminded that the promises made by the adminis-tration simply could not be kept because the groundwork had not been done and the Web site was not prepared. We are all still won-dering what happened to the promised $2,500 in premium savings that every family in America could look forward to. We are all won-dering what happened to the ability for people to keep their doc-tors. We are all wondering what happened to the ability for people to be able to keep their insurance plan.

Now, Mr. Slavitt, Mr. Cohen also was asked at his last appear-ance here in January about the issue on the risk corridors and risk sharing. The question came up about what if there is not enough money in the risk corridor to actually cover the premium shortfalls that the insurance companies are experiencing. And would he look to—that was Mr. Cohen—would he look to supplementing those funds from general revenue of the Treasury of the United States. He couldn’t answer the question. I asked him if he could provide us with a legal memorandum upon which he relied to obtain the ability to get funding from other sources if the internal funding was not enough to cover the cost of the risk corridors. That was January. I am still waiting. I would like to know if I am going to


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receive an answer to that question. And if so, when that answer might be forthcoming.

The fact of the matter is, both the Department of Health and Human Services and the White House failed to heed internal and external warnings about the lack of readiness of the exchanges. Now, we have the General Accountability Office report. And it is astonishing to see that after all the money has been spent, not all of it wisely, the Agency continues to ignore recommendations and continues to pump money into what may be a futile effort.

We are well on track to sink over $1 billion into the development of this Web site. We have very little to show for our money. I am eager for the testimony of the witnesses today. I thank the chair-man for the recognition. I will yield back the time.

Mr. MURPHY. The gentleman yields back. I now recognize the ranking member of the full committee, Mr. Waxman, for 5 minutes.

OPENING STATEMENT OF HON. HENRY A. WAXMAN, A REP-RESENTATIVE IN CONGRESS FROM THE STATE OF CALI-FORNIA

Mr. WAXMAN. Thank you very much, Mr. Chairman. This is the twelfth hearing this committee has held on the Af-

fordable Care Act since enrollment began in October 2013. These hearings, if you look at them, all have one purpose: to undermine the Affordable Care Act regardless of the facts. The hearings have misled the public and I think squandered taxpayers’ dollars. In fact, the Affordable Care Act is a historic success. It has made com-prehensive healthcare reform a reality for the American people. More than 8 million people have signed up for private health insur-ance plans through the Federal and State marketplaces, exceeding CBO’s enrollment estimates by over a million people.

An additional 6.7 million individuals have enrolled in Medicaid or the CHIP program as of May of this year. Three million young adults under the age 26 have enrolled in their parent’s health in-surance plans. And the fact sheets the Democrats put out from our staff reveal that in my district alone, if I can be parochial, 17,000 residents who were previously uninsured now have quality afford-able health coverage because of the Affordable Care Act.

So I am giving some perspective that the law has been a success. It is accomplishing what Congress and President Obama intended. Instead, we have another hearing of this committee, or another subcommittee of this full committee, trying to say how the Afford-able Care Act has problems and did things wrong and presumably should lead us to the conclusion it should be repealed.

Well, in a lawsuit, there is a word called stipulate. We can stipu-late to what the GAO has reported. And they have reported some things that for which we ought to be concerned. Because despite the success of the law, the initial rollout of Healthcare.gov had seri-ous flaws. And I’m glad we are going to hear from GAO, the Gov-ernment Accountability Office, on their investigation of Healthcare.gov contracting. We should always try to learn from mistakes, not dwell on them but learn from them. And I am glad that Mr. Slavitt is here to tell us what the administration has learned and what is being changed as a result.


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I have had experience with flawed contracts. I was the chairman of the Oversight Committee. And we released a report that identi-fied nearly 200 contracts worth over a trillion dollars that involved significant waste, fraud, abuse, or mismanagement. The FBI had a contract to create a virtual case file system that had to be can-celled after spending over $100 million. The Department of Home-land Security’s contract to build a high-tech border fence—that was supposed to keep out all these immigrants, and we are still having problems—that fence had to be canceled after wasting a billion dol-lars. The Coast Guard had a multibillion-dollar deep water contract to build boats that would not float.

My point is not to excuse the Healthcare.gov problems, but to put them in context. With the exception of Tom Davis, Congressional Republicans showed little interest in these enormous wastes of tax-payers’ dollars when George W. Bush was President. I think we should care about waste, fraud. and abuse no matter who is Presi-dent. And I am proud that Healthcare.gov was fixed quickly. Not as quickly as I would have liked, but fixed nevertheless and in time to help millions of Americans enroll for insurance coverage.

But I want to learn what went wrong so CMS can do a better job for the next time, not the way the Republicans handle this, see we told you so. There are problems, we told you there would be problems. OK. And then their conclusion is, repeal it so they can replace it. But they have never given us a replacement. Well, peo-ple are getting insurance who couldn’t get it in the past because they had preexisting medical conditions. People are finding that their insurance can’t be canceled on them after they have paid just because they got sick. Women are not discriminated against. People who couldn’t afford it can now get insurance because we give them tax breaks in order to pay for it.

So I am eager to learn what the Agency is doing so enrollment in 2015 goes more smoothly. We have unequivocal proof that healthcare reform is a success. We now need to make the 2015 en-rollment period as smooth as possible so we can build on the suc-cess. Let us go toward trying to make things better, not dwell on things that were wrong, especially if you learned the lessons and fixed the problems.

Mr. MURPHY. The gentleman’s time has expired. Just a message to members and to our folks giving testimony today: We are expect-ing votes around 10:30, 11:00—10:25, 10:40, I should say. And so we are going to try to go through this. I will have a quick gavel and ask all members really to stick with their 5 minutes as we go through this, or I will really bang it hard. And then we will move forward. If we need to be interrupted by votes, we will come back right after votes to complete things.

So now I would like to introduce the witness on the first panel for today’s hearing. Mr. Andy Slavitt is the Principal Deputy Ad-ministrator for the Centers for Medicare and Medicaid Services. In his new role, he will be responsible for agency wide policy and oper-ational program coordination as part of a new management struc-ture that comes in response to lessons learned from the rollout of Healthcare.gov and recommendations put forth to the secretary.

I will now swear in the witness. Are you aware that the com-mittee is holding an investigative hearing, and when doing so has


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the practice of taking testimony under oath? Do you have any ob-jections to testify under oath?

Mr. SLAVITT. No, I don’t. Mr. MURPHY. And the Chair advises you that under the rules of

the House and rules of the committee, you are entitled to be ad-vised by counsel. Do you desire to be advised by counsel during to-day’s testimony?

In that case, would you please rise, raise your right hand? I will swear you in.

[Witness sworn.] Mr. MURPHY. Thank you. The witness answered the affirmative,

so you are now under oath and subject to the penalties set forth in Title XVIII, Section 1001 of the United States Code. You may now give a 5-minute summary of your written statement, Mr. Slavitt.

STATEMENT OF ANDREW SLAVITT, PRINCIPAL DEPUTY AD-MINISTRATOR, CENTERS FOR MEDICARE AND MEDICAID SERVICES

Mr. SLAVITT. Good morning, Chairman Murphy, Ranking Mem-ber DeGette, and members of the subcommittee. I am Andy Slavitt, Principal Deputy Administrator of CMS.

I joined CMS 3 weeks ago from the private sector where I spent the last 20 years principally working with physicians, hospitals, health plans, and employers on solutions to problems of healthcare cost, quality, and access. In the private sector, I both started my own healthcare technology business and run larger scale health services organization with more than 30,000 employees.

In late October of last year, I began my involvement with the Af-fordable Care Act implementation when I joined a group of people helping the CMS team on the turnaround effort of the health insur-ance marketplace. I am very pleased to appear before you today. And before answering your questions, I will briefly walk you through some of the progress of the Affordable Care Act to date and talk about our priorities for the coming period.

There is growing evidence that suggests that the Affordable Care Act is making a difference in the lives of millions of Americans. In the first full year, millions of Americans selected a private insur-ance plan through the State or Federal health exchange market-place, and millions more have retained coverage on their parents’ policies or have qualified for Medicaid or CHIP.

In addition, we are seeing historically low growth in overall health spending, which has continued into 2014. This is good news for consumers with the typical premium paid for a policy purchased in the marketplace under $100, and good news for taxpayers as the recent Medicare Trust Fund report shows. And, importantly, this success is not being achieved by Government policy alone, but in partnership with the private sector as insurers grow by competing to provide better access to quality affordable services.

Now, as we move into our second year of marketplace implemen-tation, we must build on the progress that is underway and heed the lessons of the last year. Let me outline for you our highest pri-orities. First, we are focused on increasing the value consumers get when they come to the marketplace. This means continuing to im-


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prove the information, plan options and affordability of the shop-ping experience.

Second, we have critical technical and operational priorities. We must continually add automation. That has begun with critical re-leases this summer and will continue this year and in following years. While the consumer facing Web site is of course live, we are adding functionality to allow consumers to easily renew their cov-erage. Whether on the consumer-facing side or the back end, our technology improvements will be more continuous and more incre-mental. We have a very strong sense of our critical path. Our soft-ware releases so far have been on time, and we are managing these deliverables daily.

Third, let me address our management priorities to improve exe-cution. As part of the turnaround team, I experienced firsthand the challenges of the first year of marketplace implementation. And at CMS, I am now helping to oversee a series of changes to improve the management of the marketplace. As Secretary Burwell an-nounced in June, we have created clear, top-down accountability. We have also improved the management end of, and communica-tion with, our key contractor with better defined requirements, metrics driven contract reviews, and requirements for skinning the game. We have expanded our testing protocols and built more test-ing into the schedule.

Even as we address the major concerns from last year, new ones will emerge. And our management structure and team must sur-face and address issues in a disciplined manner, just as we did dur-ing the turnaround.

This coming year will be one of visible and continued improve-ment, but not perfection. We are in the early stages of a program newly serving millions of consumers and are still learning about the best ways to support their unique needs. And we are setting up and testing new processes and new technologies along the way.

From my experience at this stage, businesses begin to see how closely their design matches the battle tested needs of the market. Good organizations focus, prioritize, and learn and continuously im-prove their operations and the services they provide. It is not al-ways easy, but we understand what we need to do and are making the right progress to have a successful open enrollment, and con-tinue to deliver on the promise of the Affordable Care Act to im-prove healthcare access, cost and quality for all Americans.

Thanks, and I look forward to your questions. [The prepared statement of Mr. Slavitt follows:]


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Mr. MURPHY. Thank you. I appreciate your comments and appre-ciate your candor here before, because my very first job when I was a young man was mucking out horse stalls. And I felt like the dif-ference between—but what I got to do was I got to ride the horses. So it was a nice reward. The difference between that job and this job is I don’t get to ride the horses anymore. So I appreciate your honesty and candor in this. And I want to ask you some questions on those lines. You may recall that a year ago, Congress was told repeatedly the Healthcare.gov Web site was fine, it was ready. The months, days and weeks leading up to it, everything was ready to go. And the President said it would mirror the public’s experience with other Web sites. So we have to ask, will Healthcare.gov be fully ready this fall?

Mr. SLAVITT. Thank you, Chairman. So I obviously wasn’t here last year. It does sound like, certainly from the GAO report that I have seen, that a couple of things happened. First, the technology build was certainly bigger and more complicated than people ex-pected. And I think the scope expanded because of that. And, sec-ondly, as the GAO pointed out, there were some significant issues with the management of the project.

Mr. MURPHY. But for the future? Because you said it wouldn’t be perfection. So are there going to be hiccups this fall, too?

Mr. SLAVITT. I am sorry? Mr. MURPHY. Are there going to be some hiccups in the Web site

implementation this fall? Mr. SLAVITT. I think this year, we are in a vastly different situa-

tion. For one, we have a Web site that is already up and live and running.

Mr. MURPHY. Yes. Mr. SLAVITT. We are adding continued improvements. And we

are adding them in a much less risky fashion. We are doing re-leases frequently over the course of the summer, putting things live into production. We have built in a big testing window. So, you know, everybody will remain on their toes and nervous. Everybody knows what they need to do.

Mr. MURPHY. But I—— Mr. SLAVITT. But we are expecting to have a good open enroll-

ment. Mr. MURPHY. But the GAO said there were still significant risks

for the next open enrollment period. So you are saying everything is going to be fine and ready?

Mr. SLAVITT. I think our job is to manage those risks, understand those risks, surface them and——

Mr. MURPHY. I don’t want to take out my shovel. I just want to know—because if there is going to be problems, I would much rath-er you just tell the committee, ‘‘Look, we anticipate these problems, here is the actions we are taking to move forward.’’ I think the whole committee would appreciate that so we don’t have to get caught up in this guess game.

Mr. SLAVITT. Yes. Sure. Well, I expect that it won’t be perfect with serving millions of people.

Mr. MURPHY. OK. Mr. SLAVITT. There are certainly difficult situations. People are—

many of them are enrolling in insurance for the first time. It is a


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bumpy process at times. I think we have got a committed team of people though that by and large are doing a very good job, but there will clearly be bumps.

Mr. MURPHY. Any anticipation how many more people you will be enrolling in the fall, or how many will be enrolling for the first time?

Mr. SLAVITT. I don’t know that. Mr. MURPHY. Do you know in terms of your review of this, so far

of those who have enrolled how many of those have enrolled for the first time?

Mr. SLAVITT. I have only seen the media reports, which I can’t pull a number. But it was, I think, far greater than a half. But I have only seen that in the media.

Mr. MURPHY. When Secretary Sebelius was here before, I asked her a series of questions. I will repeat those to you. But I asked her how many were new. How many were people who previously had insurance and got a pink slip and was discontinued. How many were people who were newly eligible because of Medicaid. And of all those who signed up, how many were paying the same, less, or more.

Mr. SLAVITT. Um-hum. Mr. MURPHY. And she said really the Web site has no way—

there is no way of knowing any of those things. Would you agree that is true?

Mr. SLAVITT. Yes. I think that data is not yet known by us. I think we are getting a bead on what premiums people are paying. So that is good. We have a sense that there is good affordability offered to——

Mr. MURPHY. But when we see these numbers on how many peo-ple signed up—10 million, 11 million, whatever it is—compared to the 45 million for which there was a need for health insurance, we really still don’t know how many of that original 40, 45 million are served new by this.

Mr. SLAVITT. So the Administrator has a chart in her office, which she calls her prettiest picture, and it is a graph of the unin-sured rate over time. And it shows a drop to 13 percent——

Mr. MURPHY. So is that specifically reviewed by your office or by HHS to specifically look at people who are uninsured before and now are insured? Because you just told me that you can’t really de-termine that, and Secretary Sebelius told me there was no way of knowing that.

Mr. SLAVITT. Yes. There is no way to determine that from the Web site.

Mr. MURPHY. OK. Mr. SLAVITT. We do know the uninsured rate from the recent

Gallup Report is down to 13 percent. Mr. MURPHY. Have you tried to sign up for one of the plans on

the Web site? Mr. SLAVITT. I have—now that I am a Federal employee, I am

in the FEHBP Blue Cross plan. Mr. MURPHY. So you don’t have to be in the Affordable Care Act

yourself? Mr. SLAVITT. I am a Federal employee.


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Mr. MURPHY. Yes, well OK. And I am just curious, have you also reviewed with people if they have tried to access their physicians? The plan allows an initial visit and some other preventative care— not as much preventative care as I would like. But have you sur-veyed persons to find out if they have been able to see their physi-cians for follow-up appointments, their costs for example—to re-view their costs, their payment levels, their copay, their deductibles, have you reviewed any of those things? And——

Mr. SLAVITT. I will have to get back to you on that. I don’t think we have any hard data, but I can certainly look and try to follow- up.

Mr. MURPHY. Thank you. I will keep track of time here. And, Ms. DeGette, you are recognized for 5 minutes.

Ms. DEGETTE. Thank you, Mr. Chairman. So I agree that it is important to make the Federal exchange

Web site, and also the States, work as well for people. And I am sure, Mr. Slavitt, you agree with that too, don’t you?

Mr. SLAVITT. Yes, I do. Ms. DEGETTE. And we want to make it as easy as we can for peo-

ple to enroll. And especially as we reenroll in the 2015 plans, is that correct?

Mr. SLAVITT. That is correct, Congresswoman. Ms. DEGETTE. Now—up till now, even despite the admitted prob-

lems with the Web site, 8 million people enrolled in the market-places, is that correct?

Mr. SLAVITT. Correct. Ms. DEGETTE. And about 6.7 million enrolled in the Medicaid ex-

pansion, is that right? Mr. SLAVITT. That is right. Ms. DEGETTE. So, obviously, people were able to utilize those

Web sites to get health insurance, is that right? Mr. SLAVITT. That is correct. Ms. DEGETTE. Now, I was looking at the part of the GAO report,

and the GAO made five recommendations in the report. Are you aware of that?

Mr. SLAVITT. Yes, I am. Ms. DEGETTE. And what is your opinion of those recommenda-

tions? Mr. SLAVITT. We agree with most of those recommendations. Ms. DEGETTE. Which ones done you agree with? Mr. SLAVITT. I think the only thing in the GAO report that I

think needs a little further clarification—it is not that I don’t nec-essarily agree with it, it is the characterization of the Accenture contract. And I think it was characterized as ballooning in cost when in fact I think the Accenture contract was—there was an ini-tial contract before the work was completely scoped——

Ms. DEGETTE. OK. Let me stop you, because that was one of their findings. But that wasn’t one of their recommendations.

Mr. SLAVITT. Correct. Ms. DEGETTE. Their recommendations—— Mr. SLAVITT. So I agree with all their recommendations. Ms. DEGETTE. You agree with all five of their recommendations.

And what steps are you taking to implement those recommenda-tions?


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Mr. SLAVITT. So we are doing a number of things. First of all, in the contracting front, it is very clear now who can give work to Accenture, how work gets approved, how that contract gets man-aged and, frankly, importantly, Accenture has skin in the game to make sure that they deliver. Again, I wasn’t here last year, so I can’t speak precisely to how the project was managed. But I can tell you that, now, there is daily intensive management of the project. The risks and issues and concerns are also surfaced and dealt with. We have built early warning indicators, and there is an accountability difference that I think is very significant.

Ms. DEGETTE. Are you looking at the interoperability issues as well? That was one of the problems we had before.

Mr. SLAVITT. There are, as you point out, Congresswoman, many different pieces of this project in order to go well. And so the co-ordination and the systems integration is something that I think was missing last year. And it is in place this year.

Ms. DEGETTE. Now, are you doing anything that goes beyond the recommendations in this GAO report, Mr. Slavitt?

Mr. SLAVITT. Yes. Well, fortunately or unfortunately, the GAO report wasn’t news to the people at CMS. I think the people at CMS, who worked awfully hard but lived through that nightmare, don’t want to go through that again. So I think actions were under-way well before seeing this report. And I think they fall into the categories that I have talked about: contracting reform, technical and managerial oversight, focused and disciplined project manage-ment.

Ms. DEGETTE. Now, we keep hearing about how expensive the cost overruns and everything else in setting up Healthcare.gov were. Just as an aside, Mr. Chairman, I would like to know how much this lawsuit against the President is going to cost. But be that as it may, Mr. Slavitt, I want to ask you do you think we are going to be protected from cost overruns for the 2015 enrollment period?

Mr. SLAVITT. So again, I wasn’t here last year. But the two things that went wrong last year, one of them actually was simply the inability for anybody, and quite reasonably so—and this hap-pens in the private sector—to estimate how big this project is and how complex it is. We have got a better handle on that now. I don’t expect those overruns.

Secondly, to the point of the GAO report, the contractor wasn’t managed tightly with clear deliverables and requirements. That has been put to bed as well. So those two things are in much, much better shape.

Ms. DEGETTE. And were you aware—one last question. Were you aware that the uninsured rate in this country dropped 25 percent after the implementation of Healthcare.gov and the full implemen-tation of the ACA?

Mr. SLAVITT. Yes. Yes, Congresswoman, that sounds right. Ms. DEGETTE. Thank you. I will yield back, Mr. Chairman. Mr. MURPHY. I will recognize Mr. Harper for 5 minutes. Mr. HARPER. Thank you, Mr. Chairman. And thank you for being

here today. And I have a couple of questions I would like to ask. First of all, who is performing the role of systems integrator

now? Who is doing that?


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Mr. SLAVITT. Optum. The firm is Optum. Mr. HARPER. OK. I am sorry. Mr. SLAVITT. My prior company. Mr. HARPER. And so who has that role now? Mr. SLAVITT. Optum. The firm Optum does. Mr. HARPER. OK. Mr. SLAVITT. Plays that role. Mr. HARPER. I got you. Yes. Some questions I would like to ask

about some reports. Early this summer, we learned that there were nearly 4 million inconsistencies in the applications submitted via Healthcare.gov. Those inconsistencies are primarily for citizenship status or income. The failure to calculate these properly could mean that millions of Americans could have to pay back incorrectly calculated subsidies. So earlier this summer, it was reported that there were millions of these. First of all, how did this happen? And can’t the Web site check for accuracy?

Mr. SLAVITT. Sure. So I appreciate the question. Inconsistencies occur because of the changes that occur in peoples’ lives. And peo-ple end up having more current information than Government databases. So we ran last year, during open enrollment, hundreds of millions of checks against Government databases to check on in-come and citizenship status and so forth. And in some occasions where people particularly are in low-wage jobs, they are in sea-sonal work and other kinds of circumstances, their income is un-predictable. Or in other cases, they haven’t file taxes before be-cause they haven’t made enough money. So what happens when that happens—and just to give you a perspective on this, for a typ-ical family of four, there are 21 records searched through our auto-mated process. If even one of those records turns up not to be a match because of income or some other thing, we have to pursue documentation. And we do indeed pursue documentation to try to ensure that these people are in fact telling the truth. And we have done that——

Mr. HARPER. How—— Mr. SLAVITT. I am sorry? Mr. HARPER. How could a person on the form be a citizen or not

be a citizen? Is that something that you can verify? Mr. SLAVITT. There is documentation status. There is—whether

it is a naturalization status and so forth. Those are sometimes not as current in the Government database as what the individual resi-dent has in fact in their life.

Mr. HARPER. So, in an application—one application could have multiple inconsistencies, correct?

Mr. SLAVITT. That is correct. Mr. HARPER. And do you have a number of how many Americans

were affected by this problem? Mr. SLAVITT. So I think there were a couple of million people who

had inconsistent information that needed to be matched of some form or another. About—I would say roughly half of those are in-come changes. So these are people who will have to come back to the Web site—and we are urging people to do that—and make some adjustment, because it will spill out of course on their tax form. Of the other half, we have cleared, as of July 1, 425,000 in-consistencies. And greater than 90 percent of those are indeed in


25

favor of the individual consumer who had more up-to-date informa-tion than we did.

Mr. HARPER. You know, and this is obviously something we want to make sure doesn’t continue. So what assurances can you give us today that we won’t see these problems during the next enrollment period?

Mr. SLAVITT. Well, I think what we are learning is that a certain amount of these data discrepancy problems are going to be a fact of life.

Mr. HARPER. Yes. Mr. SLAVITT. Because of the fact that we have people who do

have variations—high variations in their income levels. And so that is going to occur in coming years. What is going to be different next year is we have now just released software that allows us to get at those inconsistencies much more quickly. What is important though is that people who we reach out to and we need additional documentation from, get in touch with us and get them back to us.

Mr. HARPER. Thank you, sir. And I will yield back. Mr. MURPHY. Mr. Tonko for 5 minutes? Mr. TONKO. Thank you, Mr. Chair. Mr. Slavitt, welcome. And you earlier went through some national stats. And I have

received information on my district who have been waiting to get info. And in the 20th Congressional District in New York, 11,000 residents who were previously uninsured now have quality, afford-able health coverage because of the ACA. The number of uninsured residents in my district has declined by some 23 percent. 214,000 individuals in the district, including 137,000 women and 54,000 children now have health insurance that covers preventative serv-ices without any copays, coinsurance, or deductible. And 262,000 individuals in my district now have insurance that cannot place an-nual or lifetime limits on their coverage. And up to 37,000—37,000 children in my district with pre-existing conditions can no longer be denied coverage for health insurance purposes.

I think that is a tremendous bit of improvement. We obviously want to continue to grow those numbers. But it is comforting to know that that kind of success is coming the way of our district.

And so, Mr. Slavitt, part of the promise of creating the one-stop marketplaces was the ability to shop for health plans side-by-side and then apply in an apples to apples comparison. While the Fed-eral Healthcare.gov site has done a good job in this regard in dis-playing the premiums and deductibles of various plans, it has been more difficult to assess differences in health plan networks or whether a particular doctor is in-network for a given plan. Could you tell us what CMS is doing to make it easier for consumers to access this information in advance of the upcoming open enroll-ment period?

Mr. SLAVITT. Thank you, Congressman. So you are indeed cor-rect. And, in fact, in the last year, I believe the typical consumer had dozens—several dozens of options to choose from in health in-surance. And our job is to try to continue to grow that. But as you point out, we have to make the information people are looking for more readily apparent and more easy to see. So we are asking the insurance companies this year to put direct links to the provider directory that fits the individual plan. But I would also just ask


26

consumers to do, and I would ask if you would talk to people in your district, is that those directories that the insurance companies keep, they are not always up to date. They try to keep them up to date. But it is always good to call the insurance company or to check with your—if there is a physician that you want to see to make sure that they are in the network, because this is really im-portant information for people to choose from.

Mr. TONKO. OK. And in terms of allowing a consumer for exam-ple to search only for plans in which their doctor is covered, could——

Mr. SLAVITT. We don’t have that ability. That is the kind of thing that might come in future years.

Mr. TONKO. What kind of obstacles stand in the way of that hap-pening?

Mr. SLAVITT. You know, I think one of the lessons learned from this project is to take disciplined incremental steps to making progress, not trying to do too much. And, you know, our schedule is pretty much filled with things that are important to make sure we are executing well. And I think those are the kinds of innova-tions that I could really see us getting excited about adding in fu-ture years. But it didn’t make the cut this year.

Mr. TONKO. Um-hum. And if I could just ask you a quick ques-tion about the Medicare Trust Fund? The trustee’s report, as you know, came out on Monday. And they are talking about the fund being secure through 2030. That is 13 years longer than was pro-jected in 2009 when the ACA was passed. The report noted that these changes may be due to the cost saving provisions of the ACA. Do you believe that to be correct?

Mr. SLAVITT. Well, I am not going to hold myself out as an ex-pert, but it sounds logical.

Mr. TONKO. And in fact, since passage of the ACA, the Medicare costs have grown at or near record lows, is that not correct?

Mr. SLAVITT. That is correct. Mr. TONKO. So would you anticipate any continuing or additional

benefits coming via Medicare? Mr. SLAVITT. Yes, I would. Mr. TONKO. OK. Well, we appreciate the leadership that you

have born with the ACA. And we thank you for the improvements. And I know on behalf of the district that I represent, the numbers are very encouraging. I share them with you here this morning, and we are going to continue to work to further improve so that one of these fundamental rights, the affordable and accessible qual-ity healthcare for all, is continued. So—and strengthened.

So with that, I yield back. And thank you, Mr. Chair. Mr. MURPHY. The gentleman’s time has expired. Now, I recognize

Mr. Griffith for 5 minutes. Mr. GRIFFITH. Thank you, Mr. Chairman. I do appreciate that.

Mr. Slavitt, thank you for being here this morning. You have indicated and testified that you were previously em-

ployed by Optum/QSSI, is that correct? Mr. SLAVITT. That is correct. Mr. GRIFFITH. And I think I heard you say in your opening state-

ment that you left their employee approximately three weeks ago, is that also correct?


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Mr. SLAVITT. A little longer than that. Yes, that is correct. Mr. GRIFFITH. A little longer, how long? Mr. SLAVITT. I could get you the exact date. Mr. GRIFFITH. Well, I don’t need the exact date. Four—between

3 and 4 weeks? Mr. SLAVITT. Yes, yes, yes. You are—something in that nature. Mr. GRIFFITH. OK. Mr. SLAVITT. Yes. Mr. GRIFFITH. Here is the question. You now work for CMS. Mr. SLAVITT. Um-hum. Mr. GRIFFITH. And from what I understand, you are a very tal-

ented individual. And that is a good thing for CMS. But if I under-stood your testimony as well, you have indicated that your previous employer is managing the Web site as the systems integrator, is that correct?

Mr. SLAVITT. Um-hum. That is correct. Mr. GRIFFITH. OK. So then the natural question, as an oversight

committee is, how are you able to manage your former employer? And doesn’t this create a conflict of interest?

Mr. SLAVITT. Sure. Thank you for the question. So, Congressman, there is, as you know, an ethics pledge that I signed. And along with that, disposed of all of my stock basically that I had had in the company.

Mr. GRIFFITH. I—— Mr. SLAVITT. It is completely clear. I recused myself. Mr. GRIFFITH. You disposed of all of your stock? You said basi-

cally. Mr. SLAVITT. Yes, all of—yes. Mr. GRIFFITH. OK. Mr. SLAVITT. I am—yes, I am not trying to qualify that. Mr. GRIFFITH. I didn’t think you were, but I wanted to make sure

on the record that you are saying you got rid of all of your stocks. Mr. SLAVITT. OK. Thank you. Yes, I got rid of all my stock and

any other ties, as appropriate. I have signed—and I am not quali-fying with as appropriate—as was appropriate. So now as a public servant, I have a very clear set of rules to follow. I have this ethics pledge. And then within that ethics pledge, I have a limited waiver which allows me, for the purposes of health reform implementation only on the Web site, to be able to interact with all of the contrac-tors, including Optum, as it solely benefits the implementation of the project. And so I do that and exercise that very carefully and very prudently. But that is a publicly available waiver that I can make sure to get to you, if you would like.

Mr. GRIFFITH. If you would, that would be great. Mr. SLAVITT. OK. Mr. GRIFFITH. And then I would like to talk about that waiver

process. Because normally, in my experience, when you move from the private sector into the public sector, there is usually some kind of a period of not dealing with your former employer. That is usu-ally a year or more. And if you could explain that process, how they came to this? And you said it was a limited waiver. We can cer-tainly look at that later. But if you could explain that process, I’d appreciate it.


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Mr. SLAVITT. Yes. So it is I think a 15-page document, which is— and I can get you the details. But——

Mr. GRIFFITH. I would appreciate that. Mr. SLAVITT. But it is a—2 years is the waiver. And I think the

only exception—I am sorry, 2 years is the agreement not to commu-nicate with my old employer. And then there is this narrow excep-tion for interaction relative to this implementation process.

Mr. GRIFFITH. All right. And I appreciate that. Let me ask you some questions about your former employer, because Optum/QSSI is a subdivision or is a subsidiary of UnitedHealth Group, isn’t that correct?

Mr. SLAVITT. That is correct. Mr. GRIFFITH. And in their 4/17 quarter 1 of this year earnings

call, the UnitedHealth Group President and CEO, Steven J. Helmsley, recognized employees and said that, you know, we try to move our employees around in different divisions of the company. And so I am a little concerned about how much of a firewall is built between Optum/QSSI and UnitedHealth Group, because UnitedHealth Group is participating in some of the exchanges and in the Federal exchange. And so we have a situation where again there is an appearance of a conflict or in-propriety because if you are shifting folks around, I said to one of my staffers this morning, what do they have a machine like they did on Men in Black and they zap their memories and they remember nothing that they saw? Because it would appear that the folks at QSSI who then re-port to UnitedHealth Group—and, in fact, Larry Renfrow is—has an office—a title or a hat in both companies. And if that is the case, aren’t they able then to gain information on competitors by participating in the process and in all these meetings, and then get an advantage over their competitors in the healthcare Web sites?

Mr. SLAVITT. So let me clarify two things. Mr. GRIFFITH. OK. Please. Mr. SLAVITT. First, nobody on the Healthcare.gov project is per-

mitted to go back and to go outside of the project and transfer into United Healthcare. That is expressly prohibited. Secondly, just an important clarification, because it is a little bit confusing: United Healthcare and UnitedHealth Group are two different things. So UnitedHealth Group is a parent company that has two divisions.

Mr. GRIFFITH. Right. Mr. SLAVITT. One is called Optum. One is United Healthcare.

And so I don’t want anybody to have the impression that Optum is a part of this insurance company. It is actually a sister company, a separately run entity——

Mr. GRIFFITH. Well, but it is a wholly un-subsidiary, is it—— Mr. SLAVITT. Correct. Correct. Mr. GRIFFITH. OK. All right. Mr. MURPHY. The gentleman’s time has expired. Mr. GRIFFITH. Thank you. I will have some follow-up questions

and will present for answers after the meeting. OK. Thank you. Mr. MURPHY. Thank you. I now recognize Ms. Castor for 5 min-

utes. Ms. CASTOR. Thank you, Mr. Chairman. Good morning. Throughout the country, everyone is seeing the benefits of the

Affordable Care Act. And as of today, Americans who are interested


29

can access new fact sheets that provide statistics based upon each congressional district. So I encourage you to go to the Democratic Web site of the Energy and Commerce Committee and—or call your member, and we can provide those.

Now, I want to share some facts about the benefits of the law in my Florida district in the Tampa Bay area. There are over 24,000 individuals in my district who were previously uninsured but now have quality, affordable health coverage because of the Affordable Care Act. The number of uninsured in my district has declined by 15 percent. Now, that could have been higher if the Republican controlled legislature and our Governor would have expanded Med-icaid in Florida. In fact, almost a million additional residents, Flo-ridians, could have health insurance. That is 43,000 of my neigh-bors in the Tampa Bay area who could have been covered, but they remain uninsured because Florida refused to expand Medicaid. But over 40,000 people in my district were able to purchase coverage through the new health insurance marketplace, and nearly 10,000 young adults were able to retain coverage through their parent’s plans. 43,000 of my older neighbors received Medicare Part D pre-scription drug discounts worth $8.2 million. I mean, that is a great shot in the arm and terrific money back into their pockets.

So as we plan for the second year of open enrollment, we all want to make sure that we don’t have the computer problems that we had last go around. So I want to ask you some questions about premiums, especially for the 2015 period. Now, open enrollment be-gins in November, is that correct?

Mr. SLAVITT. Correct. Ms. CASTOR. November—— Mr. SLAVITT. 15. Ms. CASTOR. 15. Mr. SLAVITT. Yes. Ms. CASTOR. So folks need to at some point—when will the Web

site be ready to compare plans? Mr. SLAVITT. So we are going to be sending out notices to people

starting in October to come back to the Web site, update their in-formation and letting them know that on November 15, they will be able to either, if they choose, come back to the Web site, shop for a plan, compare premiums and choose the plan they want, or as happens with Medicare Part D, Medicare Advantage, and most employers, if they choose to do nothing, they will be able to auto-matically reenroll if their existing plan is offered.

Ms. CASTOR. OK. And the deadline is in February—— Mr. SLAVITT. February 15. Ms. CASTOR. February 15 of 2015. Mr. SLAVITT. 2015. Ms. CASTOR. Now, Republicans have predicted that premiums

would skyrocket for the next go around, increasing by as much as 50 percent. But we can now test those numbers because the new rates are rolling out across the country. Are there any signs of the out-of-control rate increases that the Republicans have predicted?

Mr. SLAVITT. So far, the rate increases that have been publicly available from Rhode Island, Washington, and Delaware have all been in the mid-single digits. California, I believe, is going to come out with their numbers today. So I think that will be closely


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watched, because of the size of the State. Colorado’s, I believe, have been very steady by and large. So while this isn’t going to be true for every single individual in every single county in America, by and large the early results look positive—very positive.

Ms. CASTOR. Great. And is it accurate to say that there are more choices in the marketplace this go around, or will it depend upon the State?

Mr. SLAVITT. There will be more choices this year than last year. Ms. CASTOR. So what does competition tend to do when you

have—when consumers have more choices? Mr. SLAVITT. Better prices, better value, better services. Ms. CASTOR. Does that mean that if you have greater competition

that puts pressure on the insurance companies to keep their pre-miums low?

Mr. SLAVITT. I think this is one of those win-win situations where the private sector can grow by actually providing more value to consumers. And that appears to be what is happening.

Ms. CASTOR. And what else helps keep premiums low under the Affordable Care Act?

Mr. SLAVITT. Well, certainly, the preventive visits do. The ability for people to qualify for tax credits. You know, I think there is a whole host of things that——

Ms. CASTOR. You know, one of my favorite ones—what we did in the Affordable Care Act is the 80/20 rule, the medical loss ratio that says when a consumer purchases a policy, they have to get something meaningful. And insurance companies can’t spend too much on profits and administrative costs. And when they do, they have to rebate the money back to consumers. And for my—because I represent the State of Florida, we are really happy that our con-sumers are going to receive $42 million back this summer. I have already heard from many of our—my neighbors. And sometimes those rebates go back to the employer. So you do need to keep an eye, isn’t that right?

Mr. SLAVITT. Yes. In fact, the numbers that I have seen are that something like $9 billion has been returned to and saved by con-sumers in that process.

Ms. CASTOR. That has been very important in this day and age. Thank you very much.

Mr. MURPHY. The gentlelady’s time has expired. I now recognize Mr. Johnson for 5 minutes.

Mr. JOHNSON. Thank you, Mr. Chairman. Mr. Slavitt, it is good to see you today. You and I have had chances to interact before, and I appreciate you being with us. I agree with Mr. Griffith, based on your background, it looks like CMS is going to be the beneficiary of your experience and background.

Mr. SLAVITT. Thank you. Mr. JOHNSON. You have talked about your many years in the pri-

vate sector. Could you give a very quick summary of your years of experience and expertise and what it primarily focused on?

Mr. SLAVITT. Sure. So I started my own health information tech-nology company back in the ’90s. It was a small business that ended up serving consumers. I ended up selling that business. I worked with Optum for a number of years. I oversaw the health information technology business and grew that. I worked very


31

closely on building lots of industry wide capabilities around things like revenue cycle management, population health management. I worked closely with hospitals, with physician groups, with health insurance plans, State Governments, all really focused on quality, cost and access issues.

Mr. JOHNSON. OK. And to summarize, I think when you were re-sponding to Mr. Griffith’s questions, you led the team that basically made Healthcare.gov usable in October, correct?

Mr. SLAVITT. That is correct. Mr. JOHNSON. OK. So I want to ask you, you have all of those

years of experience and expertise in information technology, specifi-cally in the healthcare arena. How much should Healthcare.gov have cost?

Mr. SLAVITT. That is a really good question, and I am not sure I know the answer to it. It is not unusual for large-scale health projects—for example, I can think of big projects from Kaiser Permanente when they installed electronic medical records—to cost a couple billion dollars to put in place. It is hard to know what the benchmark is to build a consumer facing Web site and set of back- end systems to connect to 50 States, to Medicaid plans, to insur-ance companies. So I am not quite sure.

Mr. JOHNSON. Well, let me help you a little bit. Because I don’t know if you remember or not, but my background is a 30-year in-formation technology professional.

Mr. SLAVITT. Yes. I do. Mr. JOHNSON. So I have been through the lessons learned and

the trial by error of trying to project costs of complex IT systems like this. The GAO says that we spent nearly a billion dollars on this, with the cost climbing. Do you believe that taxpayers have re-ceived a good return on their investment thus far?

Mr. SLAVITT. Congressman, I think two things happened. And it is hard to know how much fits into each category. The one thing that happened is, clearly, this was a more complex project and needed a lot more work than people expected. And for that part, I think——

Mr. JOHNSON. And that goes without—yes. And see, that goes back to the genesis of some of the questions that we got into the last time you and I were here. If you have a firm set of require-ments, and if you have a systematic life cycle design process, it is much easier to project those costs.

Mr. SLAVITT. Right. Yes. Mr. JOHNSON. I know when I was doing large-scale program

management on large IT systems, the industry general rule was that in the life cycle of a complex system, that the implementation part—the design, the building, the implementation part is only about 25 percent of the cost—the life cycle cost of a system. The rest of the cost is in maintenance, operations and further on down the road. So if this thing has already cost the taxpayers a billion dollars or more to get to where we are today, we can reasonably expect that this is going to cost billions, billions more over the life cycle of this thing, correct?

Mr. SLAVITT. Yes, I couldn’t put an estimate on that.


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Mr. JOHNSON. But you do agree with the concept in general that maintenance and operation costs a heck of a lot more overtime than the initial implementation does, right?

Mr. SLAVITT. I do think there will be an ongoing operating cost. I don’t know that it will be greater. I think that I have to look, and I would have to look at the budget request, which I don’t have with me.

Mr. JOHNSON. OK. Well, the budget request has nothing to do with how much it is going to cost.

Mr. SLAVITT. To do—— Mr. JOHNSON. You understand how the industry works. Mr. SLAVITT. Yes. Mr. JOHNSON. You understand the life cycle of software develop-

ment. You understand that. But I appreciate it that you don’t real-ly want to answer that question.

Mr. SLAVITT. I don’t know the answer. Mr. JOHNSON. The GAO says ultimately more money was spent

to get less capability. Do you agree with that? Mr. SLAVITT. I think there were clear inefficiencies—— Mr. JOHNSON. Because a lot of it is still not working. Mr. SLAVITT. I think there were clear inefficiencies in how this

was managed. I think, didn’t it also say, Congressman, that in the real world, it is not always possible to know your scope going in. In an ideal world, you can. But I think the estimates proved that they need to do more work in the——

Mr. JOHNSON. Thank you, Mr. Chairman. And I agree that it is not always possible to know the scope, but it is possible to fence the scope and, therefore, knowing that what you are going to pay for is what you are going to get, which is clearly not what hap-pened here.

Mr. MURPHY. Thank you. The gentleman’s—— Mr. JOHNSON. Thank you, Mr. Chairman. Mr. MURPHY. The gentleman’s time has expired. I again remind

members, please keep it in the timeframe, because we are expect-ing votes in a few minutes. And I want to be fair to everybody. Mr. Yarmuth, you are recognized for 5 minutes.

Mr. YARMUTH. Thank you very much, Mr. Chairman. Mr. Slavitt, thank you for your testimony and your work.

I want to talk about some of the things that have happened in Kentucky since we are actually doing an update, and I am very proud of the experience we have had so far in my State. But there was actually some pretty astounding news earlier this week regard-ing the trustees of Medicare coming from them about the prospects for viability of the Medicare trust fund. Are you familiar with that information?

Mr. SLAVITT. Yes, I am, Congressman. Mr. YARMUTH. Could you tell us what has happened? Because,

as I recall, when we passed the Affordable Care Act in 2010, at that time the trustees were projecting the trust fund would be in-solvent by 2017.

Mr. SLAVITT. I believe, if I am not mistaken, that in summary the projection is the trust fund life expectancy was extended to 2030.


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Mr. YARMUTH. 2030. So that is pretty astounding that in 4 years the projection extended the life—the viability of Medicare by 13 years. And there was also some really fascinating and I think im-pressive data about pro-beneficiary expenditures that they essen-tially were flat year to year, there is no increase when historically they have been running at somewhere between 5 and 10 percent annually, is that correct?

Mr. SLAVITT. That is correct. Mr. YARMUTH. All right. Thank you. So one of the things that I

know we have spent a lot of time talking about, people who have signed up for insurance in the private insurance market under the Affordable Care Act. But this is data that has come about from the Commissioner of Medicaid in Kentucky. And I think this is so im-pressive. If you look at the top map, that is the 120 counties of Kentucky, color coded by the percentage of uninsured citizens in those counties prior to the ACA.

[Chart.] Mr. YARMUTH. And red and orange—which are most of the coun-

ties in Kentucky, I think all but probably a dozen—were rates of 17 to 20 percent, and then more than 20 percent. The bottom map is the current situation. And it is staggering to me because—the green is under 13, is under 11 percent, 8 to 11 percent, and blues, 5 to 8 percent, and the dark blue, less than 5 percent—we have counties in Appalachia, southeastern Kentucky, that went from having the highest uninsured rate in the State, over 20 percent, to the lowest uninsured rate, under 5 percent. And that to me is a staggering accomplishment. In Kentucky, we essentially have in-sured about half of the previously uninsured population of the Commonwealth, in a State that has very poor health historically and currently, and people who are in desperately in need of healthcare. And what is even more important, I think, than that is that the report of the commissioner of Medicaid in Kentucky talked about how preventive service utilization has increased dra-matically to almost 16 percent. An annual dental visit, which they weren’t doing before. Adult preventive services increased by almost 37 percent, breast cancer screening by 20 percent, colorectal cancer screening by—up by 16 percent. Very, very important health meas-ures that I think will pay off for the Commonwealth economically but also for the life of these citizens going forward.

And also what is, I think, very important to note is how much reimbursements went up for providers in the Commonwealth, to-tals of—let us see. Reimbursements from now—those now covered under Medicaid expansion went up by $284 million in just the first 6 months. So, many of those hospitals and doctors and other pro-viders who were providing uncompensated care for Kentucky resi-dents are now being compensated. And that also is a great benefit to the taxpayers and the treasury of the Commonwealth.

So I just mention those things because it is very clear to me that States that embrace the Affordable Care Act and are committed to making it work are having very, very positive experiences. The ad-verse experiences are coming in States where the administrations of those States, the governments decided in some cases just not to participate in, and other cases to try and sabotage the law.


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So I thank you for your work and for the information you brought to us today. I yield back.

Mr. SLAVITT. Thank you. Mr. MURPHY. The gentleman yields back. Dr. Gingrey, you are

recognized for 5 minutes. Mr. GINGREY. Mr. Slavitt, one of the members earlier asked or

made the comment that because of the medical loss ratio—I think maybe they were talking about the State of Florida—how much money was returned to the consumer of health insurance through the plans. Let me start out by specifically asking you this, because this has also been reported: If an individual ended up receiving an incorrect subsidy that they were not entitled to, what will be done to rectify this issue? Specifically, will they be sent additional fund-ing if the subsidy was too low? Or will they need to pay back the money if the subsidy was too high? And when will consumers know if they owe the Government more money?

Mr. SLAVITT. Yes. Thank you for the question, Congressman. So if individuals have changes in their income, the best advice is they should come back to the Web site and update that information so that their tax credit and premium can be updated. For those ad-justments that are not made, when it comes to tax time, they will either receive a refund or they will have additional money that they will owe.

Mr. GINGREY. Well, I think we need to get some specific answers on questions like that, because this pay and chase model, as we know in past, absolutely in regard to let us say paying Medicare claims that were fraudulent, and then you have to go chase them down to try and get them back, you never do. You are aware of this GAO report that came out—well, I guess today. And it states that in January, CMS awarded a new company a contract to continue work on the Federal marketplace for $91 million, right?

Mr. SLAVITT. Correct. Mr. GINGREY. GAO says in the report that the cost now has

ballooned to more than $175 million, is that correct? Mr. SLAVITT. That is what the report says, yes. Mr. GINGREY. Yes. Right. And the investigation of course ended

a few months ago. Do you know if the cost—this estimated cost of 91 million that is now 175 million that is in the report, has it gone up even further since the report?

Mr. SLAVITT. No. I think the estimate of the total contract—and again, this is not what has been paid, this is what is being budg-eted—is about 170 million. That is correct.

Mr. GINGREY. You know, that is a pretty big error, 91 million versus 175 million—how is it you can offer a contract for $91 mil-lion and have it grow that much over such a short period of time?

Mr. SLAVITT. So I think the proper characterization of that con-tract is that the scope of the contract was completed after the ini-tial contract was awarded. So I wouldn’t characterize the cost as ballooning. I would actually characterize it as the proper scope with the contractor, Accenture, was determined after they got going. And the reason for that, if you don’t mind me saying, is be-cause Accenture needed to be brought in in an urgent situation to take over for a contractor that was leaving. And so they agreed to an initial amount. And this was before my time. And then agreed


35

that they would come back after they got started, started the tran-sition from CGI. And then they would come to terms with how much the scope ought to be.

Mr. GINGREY. Mr. Slavitt, in my remaining time, let me ask you this. You have been with CMS now for what, 3 weeks?

Mr. SLAVITT. Three weeks. Mr. GINGREY. And you are the number two guy there, right? Mr. SLAVITT. Correct. Mr. GINGREY. You know, when—back in 2009/2010 timeframe

when we marked up this Bill, a lot of us on this side of the aisle felt like that if the American people were going to have this Afford-able Care Act—un-Affordable Care Act forced down their throat, that members of Congress and members of the administration, the President, cabinet members, political appointees like yourself—you are not a career bureaucrat——

Mr. SLAVITT. That is correct. Mr. GINGREY. You have been appointed by the President to come

into this important position. We felt, and still feel—many of us still feel that you ought to eat your own dog food. And members of Con-gress, I think it is appropriate, we are doing that. We had to come off the Federal Employee Health Benefit Plan and get on the DC health link. And yet you members of the administration, the Presi-dent and his family really ought to be doing the same thing. If— I know you worked in IT. But let us just say if you worked for Ford Motor Company, would you drive a Chevrolet? I kind of doubt it.

Mr. SLAVITT. I would hope not. Mr. GINGREY. I think you probably would drive a Ford. Mr. SLAVITT. I would—— Mr. GINGREY. But what do you think about that in these remain-

ing few seconds? Respond to me. Do you think it would be appro-priate as a show of good faith to the American people that you guys and gals that are running this show that forced it upon us would be in the same plan that the American people have to be in?

Mr. SLAVITT. My understanding is that the President and his family are on the exchange. I don’t know this for a fact. But that is my understanding. And if it is determined that the rest of us should be on the exchange, I would happily do that.

Mr. GINGREY. Well, if you—if that is true, please let me know. And I know we are limited in time. And I yield back, Mr. Chair-man.

Mr. SLAVITT. OK. Mr. MURPHY. I thank the gentleman to yield back. I now recog-

nize Mr. Green for 5 minutes. Mr. GREEN. Thank you, Mr. Chairman. And to my good friend

and colleague from Georgia—who I am going to miss—I not only drive Chevys, but I am also on the plan. We had to buy ours through our exchange. And so—but I want to thank the chairman and ranking member and our witness for testifying.

For decades, the United States has had the highest rate of unin-sured in the industrialized world. This drives up costs and puts families at risk of bankruptcy when they get sick. The main reason is why we have a health sick system rather than a healthcare sys-tem, because millions of Americans can’t get the care they need outside the emergency room. In our own district in Texas, a very


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urban district, the Affordable Care Act’s enabled almost 20,000 people previously uninsured to get quality, affordable coverage. Overall, the insurance rate in our district has fallen by 8 percent. Fifty-two thousand people in the district would have had access to coverage if Texas had expanded Medicaid, and hopefully we will still get to that.

Earlier this month, the New England Journal of Medicine—not Fox News, not a left- or right-wing Internet site, but the New Eng-land Journal of Medicine—released two reports on coverage under the ACA. And I would like to read a quote from them: ‘‘With con-tinuing enrollment . . . the numbers of Americans gaining insur-ance for the first time—or insurance that is better in quality or more affordable than their previous policy—will total in the tens of millions.’’

And, Mr. Chairman, I would like to ask unanimous consent to place that article in the record.

Mr. MURPHY. Without objection. [The information follows:]


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Mr. GREEN. Thank you. Mr. Slavitt, are you familiar with these reports? Mr. SLAVITT. Yes, at the high level. Mr. GREEN. Earlier this week, the Gallup Poll released their own

latest total numbers of Americans having insurance. Are you famil-iar with that survey?

Mr. SLAVITT. Yes, I am, Congressman. Mr. GREEN. The—similar, the Urban Institute and Common-

wealth Fund conducted surveys. Can you discuss that also? Mr. SLAVITT. I am familiar with those two, yes. Mr. GREEN. OK. Would you agree that the findings of both Gal-

lup and the New England Journal of Medicine are consistent with the millions of Americans signing up for healthcare?

Mr. SLAVITT. They are consistent, very encouraging. Mr. GREEN. OK. At this point, the only thing keeping millions

more Americans from signing up for the coverage is the refusal of Republican Governors and State legislatures to expand Medicaid. If they did, another 5 million Americans would be eligible for insur-ance.

Mr. Chairman, I think the Affordable Care Act, obviously, com-ing out of the chute, it was a problem. But it has been fixed. And hopefully we will see in the renewals it happen. But it is working, although a lot of us had tough times in October into mid-November who supported it.

Mr. Slavitt, what is CMS doing to address the execution of the technology lessons learned from the first enrollment section?

Mr. SLAVITT. Well, Congressman, I got to this project when it was beginning the turnaround stage at the end of October. And I think what we are doing now is essentially carrying over—just as we did in the turnaround. There is no magic to it. It is basic block-ing and tackling. It is good communication. It is, quite frankly, a lot of the recommendations that have come out of the GAO report and making sure that we have precise requirements. It is daily management. It is senior level accountability that goes all the way up to the secretary.

Mr. GREEN. You know, I advocated in Texas, having served a lot of years in the State legislature, is that we should have had a Texas plan that we could have done. Some States had good exam-ples of their plan, some not. Could you talk about that? Like, I know the State of Maryland and some other States had problems. And I don’t know if they are fixed or not. But were they similar to what we had on a national scale for our States that didn’t have a State plan?

Mr. SLAVITT. In terms of the challenges, or just in terms of what they got done in their State?

Mr. GREEN. Yes. Were they on a smaller scale, having the same challenges that we were?

Mr. SLAVITT. I think it is probably safe to conclude at this point, towards the end of 2014, that it was the rare State, and maybe Kentucky’s one of them, that didn’t underestimate how difficult this would be, given all of the complexities of tying into Medicaid, tying into insurance companies, offering a consumer Web site. In the first year of any new program, in my experience, whether it is public sector or private sector, it is sometimes bumpy. The same is


53

going to be true in the second year. But those problems become more and more minor, and we get better all the time.

Mr. GREEN. To the best of your knowledge, for example if a State wanted to create their own plan now, there is nothing in the law that would prohibit them from approaching CMS or HHS, either that or expanding in Medicaid coverage?

Mr. SLAVITT. That is correct. Mr. GREEN. OK. Thank you, Mr. Chairman. I will yield back my

time. Mr. MURPHY. The gentleman yields back. I now recognize Dr.

Burgess for 5 minutes. Mr. BURGESS. Again, thank you, Mr. Slavitt, for being here. You

heard my comments during the opening statement about the memorandum that Mr. Cohen suggested that I might have. And I again just want to underscore that that is important to me. And even though Mr. Cohen is no longer at CMS, I would very much like to see that.

Mr. SLAVITT. It is my understanding that we have just recently sent it. So if you don’t receive it, I will follow-up with your office and make sure that you have it.

Mr. BURGESS. All right. Very well. You know, and it is kind of— I was just thinking it has been almost a year ago, really right now, that your boss, Marilyn Tavenner, was here. And we talked about some things about the upcoming launch of Healthcare.gov. But of course, that was just a little less than a month after the unilateral decision by the President to delay the employer mandate. Now, I remember asking Ms. Tavenner about how—was she involved in that decision. And she asserted that she was not. I asked her how she found out about it. And she said her chief of staff told her, which I found rather astonishing. If my chief of staff came and gave me information like that, I mean I would be curious as to where that came from. And she seemed to lack curiosity about how that decision was reached. But let me ask you this, we are a year later. The employer mandate is now supposed to kick in about a week and a half after Election Day in November. Is it your under-standing that the employer mandate will in fact be enacted in No-vember, or can we expect a further delay of that?

Mr. SLAVITT. So I am still working my way around the Federal Government, trying to understand how it all works.

Mr. BURGESS. Good luck. Mr. SLAVITT. Thank you. My understanding—and you could

please correct me if I am wrong—is that that is an IRS and Treas-ury area of responsibility. So I haven’t been exposed to that so much yet.

Mr. BURGESS. My personal belief is that we will never see the employer mandate. I have no inside information, obviously. I am not speaking for the committee. I am just speaking for myself. When you look at the disruption that was caused in the individual market, October, November, December of last year, and remind yourself that that was only 15 percent of the insurance market that had that convulsion, had that happened to the entire—both the large group market, the small group market, the individual market all at once, it would have been pretty disruptive.


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Now, you heard Mr. Gingrey talk about members of Congress and members of the administration should take the same thing people have to take. I agree with that. In fact, I did not take the BC Exchange that was offered to Members of Congress and their staff. I said, ‘‘Look, I’ll do what other people in my district have to do.’’ I went to Healthcare.gov, bought a bronze plan off the Web site. The biggest mess I have ever been involved in in my life. But I finally got through. It took about three and a half months to do so. Now, I am wondering what my rate is going to be next year. I have got the most expensive health insurance policy I have ever had, an enormous deductible. But what can I look forward to in the next insurance year? You talked about you wanted a successful open enrollment. Is it going to be successful? What are the rates going to look like?

Mr. SLAVITT. Yes. So I think we are at a stage now where—and indeed, this is one of our high measures for success, making sure that there are enough choices and enough affordability. And, of course, each State is going through their own process and going through rate reviews. We have seen some States publicly now come out with their rates. I believe Rhode Island, Washington. California today is going to have I think an announcement with what their rates are. I couldn’t tell you, Congressman, about Texas, because I don’t know. But generally speaking, what we have seen are rates that are in not the double digit increased levels but in the mid-sin-gle digit levels. That is not going to necessarily be the case in every county in America, but that seems to be what is happening on av-erage.

Mr. BURGESS. But still, I mean, you mentioned that in three or four States. We have got a long way to go before renewal rates across the country are in evidence.

Mr. SLAVITT. No question. No question. Mr. BURGESS. I mean, you are the Principle Deputy Adminis-

trator. Do you have any responsibility or involvement in the re-newal or the rate filings?

Mr. SLAVITT. I think these rate filings get reviewed and ap-proved, you know, at the State level. There is a process. And I think it is in the mid-process. I believe right now that the——

Mr. BURGESS. Let me just interrupt you, because my time is run-ning up. Do you receive interim reports or updates on what those State filings are?

Mr. SLAVITT. I think there has been an initial submission, and I have seen a high-level report. But this is not yet final informa-tion.

Mr. BURGESS. And is your office going to make those rate filings public information? Will we have the availability to access that?

Mr. SLAVITT. When they become final, absolutely. Absolutely. Mr. BURGESS. Again, as a Healthcare.gov member from the State

of Texas of the Federal fallback, I would very much like to know what my renewal rates are for next year.

Mr. SLAVITT. Of course. Mr. BURGESS. Thank you, Mr. Chairman. I will yield back. Mr. MURPHY. The gentleman’s time has expired. I recognize Ms.

Schakowsky for 5 minutes. Ms. SCHAKOWSKY. Thank you, Mr. Chairman.


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I just wanted to tell you, Mr. Slavitt, I don’t know if your office and your position is actually in charge, but we have gotten tremen-dous cooperation from CMS when we have had constituent issues. And, you know, clearly, it comes out. Consumers get confused, have a lot of questions, have some problems. I get irritated sometimes. On the other side, I feel like there is an embracing of these prob-lems rather than a constituent service attitude to fix the problems. And when we have tried, we have had good success. And so I just wanted to tell you I appreciate that.

I also just wanted to say that the minority staff has done a dis-trict by district, the benefits of the healthcare reform law in all the districts in the country. And it is just wonderful to see how the number of people that in my district, 283,000 people in my district, including 51,000 children and 120,000 women now have health in-surance that covers preventive services without any copays, coin-surance, or deductibles. Needless to say, that is huge.

Mr. SLAVITT. Very good news. Ms. SCHAKOWSKY. And up to 36,000 children in my district with

preexisting conditions can no longer be denied coverage by health insurers. It is just lots and lots of good news, including the new Medicaid enrollees that are now being covered.

But I did have a question. So we are talking somewhat about the States that have expanded Medicaid and have not. Twenty-six States, the District of Columbia, have expanded Medicaid coverage under the Affordable Care Act. And in those States, Medicaid is seeing great success. Enrollment has increased substantially, and the percentage of the population without insurance has declined dramatically. And I am asking you, Mr. Slavitt, if you have seen studies that compare the decline in the number of uninsured in States that did and did not expand Medicaid?

Mr. SLAVITT. Yes, I have seen those studies. Ms. SCHAKOWSKY. And can you tell me what you found? Mr. SLAVITT. The States that have expanded Medicaid—and I

will have to get back to you on the exact figure—have seen signifi-cantly lower rates of uninsured than those States that did not ex-pand Medicaid.

Ms. SCHAKOWSKY. But we have seen a decline in any case in most—isn’t it in all States?

Mr. SLAVITT. Declined in any case, and a bigger decline in States that have expanded Medicaid.

Ms. SCHAKOWSKY. And have you seen the estimates about the number of Americans that would receive healthcare coverage if all 50 States expanded Medicaid? Do you know the size of this esti-mate?

Mr. SLAVITT. I believe that it is an additional 5 million, if I am not mistaken.

Ms. SCHAKOWSKY. All right. Thank you. And if that is the case, and I believe you that it is, this is really an appalling number, 5 million Americans who would receive healthcare coverage if Repub-lican Governors and State legislatures took the simple step of ex-panding Medicaid. It is obviously good for people when more people have health insurance.

But, Mr. Slavitt, what about healthcare providers? How does the Medicaid expansion help them?


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Mr. SLAVITT. So my information is anecdotal. But it appears that if there’s a dramatic reduction, or a significant reduction in uncom-pensated care, it appears that this has been a very good thing for providers.

Ms. SCHAKOWSKY. And this committee has spent the last 3 years looking for some Affordable Care Act-related scandal. And despite all their concern, they have systematically ignored an ongoing healthcare tragedy: the dereliction of duty by Republican Governors around the country who refuse to expand Medicaid. For those who have not been following this closely, the Affordable Care Act pro-vides 100 percent Federal funding for the first 3 years for the States to expand Medicaid coverage to millions of low-income Americans, right?

Mr. SLAVITT. That is correct. Ms. SCHAKOWSKY. And yet for some reason, Republican Gov-

ernors in dozens of States have refused to expand coverage to low- income insured individuals in their States, correct?

Mr. SLAVITT. That is correct. Ms. SCHAKOWSKY. Well, this to me is a real scandal. The expan-

sion doesn’t cost States a dime. It provides quality affordable cov-erage for millions of Americans working hard just to get by. Yet some Republican Governors and State legislatures are deliberately refusing to provide coverage to millions of uninsured Americans.

And, Mr. Chairman, that it seems to me is an issue this sub-committee really should look into. And I yield back.

Mr. MURPHY. The gentlelady yields back. I now recognize Mrs. Blackburn for 5 minutes.

Mrs. BLACKBURN. Thank you, Mr. Chairman. And thank you for being with us today. Overseeing this implementation, getting to the bottom of a lot of the questions, I think is very important, and con-tinuing to do our due diligence. And I know that several people have mentioned the New England Journal of Medicine article from last week, the health reform and changes in health insurance cov-erage. And my friends across the aisle have wanted to tout that as being something to prove their point.

I think that it is important though to go in here and look at how the authors came to the conclusion that 5.2 percent more had in-surance, that there was a decline in those without insurance from September 2013 to June of 2014. And then the authors mention the limitations of their study. They said that the study did not distin-guish between persons enrolling for the first time and those who were changing their enrollment. And I really wonder how many of those that had to buy more expensive policies, new policies that were Obamacare compliant? How did that affect that number?

And the authors measured improvement and access to care by asking two questions. First, did the survey participants identify a personal doctor? And, second, did the survey participants report difficulty paying medical bills? Well, it seems to me a more impor-tant outcome measure would be whether a person was actually able to see the doctor. Because in our district, we hear from people they can’t get access to the doctor. They have got access to the queue, because they have got a card. They can’t get access to the doctor.

So while my colleagues across the aisle talk about how many people have insurance, I would like to remind everyone that having


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an insurance card is not the same as having medical care. And I continue to hear from people in Tennessee who lost their health plan. They liked it. They can’t keep it. I hear from people that have not been able to keep their doctor because of the narrow networks in Obamacare. I hear from people who go to the doctor and need a test, but can’t get the test because their copays and their coinsur-ance are too high. They can’t afford it. This stuff is too expensive to afford.

And, finally, we are hearing from some of our Tennessee insur-ance carriers, they are going to have a 19 percent increase in the health insurance premiums in 2015. So it is kind of like adding in-sult to injury. You have got this stuff. You can’t use it because it is too expensive to afford. The copays are too high. You have an insurance card, but you can’t get in to see the doctor and you are having to wait. I don’t understand why my colleagues across the aisle continue to defend this thing.

But, today, we are shifting our focus to oversight and the way that taxpayer dollars—I remind everyone, taxpayer dollars are pay-ing for this. And the people don’t like it. On January 1, 2014, HHS certified to Congress that the American health benefit exchanges, the marketplace, were verifying their applicants for advanced pay-ments of the tax credits. Cost share and reductions were indeed eli-gible. However, the GAO secret shopper investigation found that 11 out of 12 secret shoppers were able to obtain health insurance and qualify for premium tax credits using fictitious identities and fraudulent documents. Now, let me, for the benefit of my col-leagues, talk a little bit about what a secret shopper program does.

When I had my marketing business, we would run secret shopper programs for malls and shopping centers and chambers of com-merce. You would identify where your problems are. And then you get in there and you clean them up. The problem is the system al-lows fraud. If you have got 11 out of 12 that something is wrong, Mr. Slavitt, that is a failing grade. There had been over 30 delays in implementation. The President has made multiple unilateral changes. And, you know, we are here to learn about the contracting practices that took place at CMS with the botched implementation of this law. We are looking at the GAO study. This thing is not much better.

Let us talk about this contract. So January, CMS awarded a con-tract to a new company to continue work on the Federal market-place. It was a $91 million contract, correct?

Mr. SLAVITT. Correct. Mrs. BLACKBURN. OK. Now, GAO says that cost has ballooned to

more than $175 million, is that correct? Mr. MURPHY. You can answer that question. Mr. SLAVITT. That is what the report says. I don’t agree with

that characterization, but it is what the report says. Mrs. BLACKBURN. OK. Thank you. I will submit the rest of my

questions. I yield back. Mr. MURPHY. Thank you. Now, we have just been called to vote.

We will go through Mrs. Ellmers’ questions, and then we will take a break and come back for the second part.

Mrs. Ellmers, you are recognized for 5 minutes.


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Mrs. ELLMERS. Thank you, Mr. Chairman. And thank you for being with us, Mr. Slavitt.

I would like to go back to a little bit of the discussion you had with my colleague from Ohio, Mr. Johnson. I know you had made some comments there at the end where you pointed out that, in the real world, things are much more realistic. And that ideologically, many times things seem like they are going to be better than they are. I would say to you, sir, that that is exactly why I ended up running for office, being a nurse, because I did see—and my hus-band, as a doctor, saw that the plan that was going forward was not going to be realistic. And I think we have learned over time that that is the case, and that there were many promises made that have not been kept—well intended, but not true for the Amer-ican people. So I do share with you that same sentiment but real-ize, too, that that is why we feel so strongly about this issue, that the American people do need to see what can be realistic and achieved in good healthcare in this country, and good healthcare coverage.

You did also have an exchange with Mr. Johnson on the cost of Healthcare.gov, and what it should have cost. You reluctantly did not answer the question of the cost being a billion dollars, is a bil-lion dollars too much for the implementation thus far?

Mr. SLAVITT. So thank you, Congresswoman. I have not seen a study yet which looks at what the appropriate cost for building the entire Healthcare.gov system should be. But, of course, I do ac-knowledge that our colleagues at the GAO pointed out that there were absolutely inefficiencies and waste in the way the contract was managed. So at the very least, we know there was some. I would hesitate to say though that it was entirely waste, because there was a really significant set of systems built. And I think those systems have significant long-term value for the country.

Mrs. ELLMERS. You know, there again, it gets back to that same issue of what is realistic, what is achievable. And, you know, sim-ply throwing money at it, and then looking back in hindsight to de-termine what did work and didn’t, I think we all are learning from this experience. So that, of course, has value. I don’t know how you measure it. But the American taxpayers are still on the hook for this. And that is again why we are taking the approach we are, which is, when is it going to be enough? When are we going to achieve the goals at a cost effective measure?

I want to look into some of the issues with security breaches. Are you aware at this time of any problems that the Web sites—from the building of the Web site, and that there are still concerns? Are you aware of any right now?

Mr. SLAVITT. So there have been no successful malicious attacks. And, certainly to the best of my knowledge, no one’s individual data has ever been compromised from the Healthcare.gov Web site.

Mrs. ELLMERS. So to the best of your knowledge, and just based on the answer that you gave, you are not seeing that there were any related information breaches in Healthcare.gov or traveling through the Federal exchanges that you would consider a security breach?


59

Mr. SLAVITT. We have not seen any malicious attacks that have been successful. And we have not seen anybody’s personal informa-tion in any way get compromised.

Mrs. ELLMERS. What is the definition of a successful breach? Mr. SLAVITT. Well, I am not trying to be cagy, just that nobody

has successfully penetrated the security system to the best of my knowledge, Congresswoman.

Mrs. ELLMERS. Are you aware of any companies building, oper-ating, or otherwise working on Federal exchanges, obtaining access to information that they should not have? Anyone who is outside of the system or working on—that have?

Mr. SLAVITT. Not to my knowledge. Mrs. ELLMERS. And information on enrollees or applicants, none

there as well? Mr. SLAVITT. No, not to my knowledge. Mrs. ELLMERS. Are you aware of any changes to site protocols or

standards to address breaches to accessed information? Mr. SLAVITT. I think it is fair to say that the security team does

continuous monitoring and makes changes and puts in new patches as new—different security things have been found out about in the industry and so forth. So there is a continuous monitoring——

Mrs. ELLMERS. Can we obtain that information over time, any of the changes and updates that may have taken place for the com-mittee?

Mr. SLAVITT. Sure. Let me figure out what I can share. I obvi-ously don’t want all of the things that our security team does to be well understood by the wrong people. But I want to make sure to get you the information you need.

Mrs. ELLMERS. OK. Thank you. Thank you, Mr. Chairman. I yield back.

Mr. MURPHY. Thank you. They have called votes. Mr. Slavitt, we thank you for your testimony. Members will have

a few days to get other questions to you. And we would appreciate a quick, thorough, and honest response.

Mrs. DEGETTE. Mr. Chairman, can I move to strike the last word, just very briefly?

Mr. MURPHY. Sure. Mrs. DEGETTE. I just want to—Dr. Burgess had mentioned ear-

lier that HHS didn’t respond to the committee’s request for an analysis of its legal authority to make payments in connection with the risk corridors program. I have just been told that HSS did re-spond to the request and provided a response to the committee on Jun 18, 2014. And in the response, they also included a legal anal-ysis. So I wanted to clarify the record. And I wanted to also make sure that if Dr. Burgess, or you or the committee staff did not re-ceive that, we will get another copy to you.

Mr. MURPHY. Dr. Burgess? Mr. BURGESS. Well, in fact, I did not receive it. But I would be

anxious to look at it and see if it answers the question as it was asked. And, Mr. Chairman, if I could have the indulgence of one brief follow-up with Mr. Slavitt?

Mr. MURPHY. Yes, very brief. Mr. BURGESS. Mr. Slavitt, we have heard a lot of discussion

about the fact that when this thing went live, the back-end part


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of the system was not built. Is it now built and available and ready to use, the part that pays providers?

Mr. SLAVITT. So the part that pays the issuers, issuers are get-ting paid today.

Mr. BURGESS. How about the doctors and hospitals? Mr. SLAVITT. The doctors and hospitals get paid by the health

plans, not by the exchange—not by the marketplace. Mr. BURGESS. OK. So the back-end part of the system is up and

fully functional? Mr. SLAVITT. No, no, no. The back-end part of the system is going

through continuous releases. Today, we are paying the issuers on an estimated basis. There will be a coming release this year where—by the end of this year—where they will begin to get paid at a policy level basis. And then next year, continued automation will occur to tie everything into the back end of CMS’ systems.

Mr. BURGESS. OK. Mr. Chairman, it just begs the question. Have the right people been paid the right amount of money? These are taxpayer dollars that are——

Mr. SLAVITT. I will follow-up—— Mr. MURPHY. What we will do is we will follow-up with some

questions to you. Mr. SLAVITT. Yes. I will be happy to follow-up. Mr. MURPHY. Mr. Woods, we will probably reconvene—our votes

will probably take us to 11:30. So this will be in a brief recess until 11:30. And we will be back. Thank you very much.

[Recess.] Mr. MURPHY. This reconvenes the Subcommittee on Oversight

and Investigations. I would now like to introduce the witness on the second panel for today’s hearing. Mr. William T. Woods is the Director with the Acquisition and Sourcing Management Team at the Government Accountability Office. He provides overall direction for GAO’s review of contracting activities at defense and civilian agencies.

I will now swear in the witness. Are you aware that this com-mittee is holding an investigative hearing, and when doing so has the practice of taking testimony under oath? Do you have any ob-jections to testifying under oath?

Mr. WOODS. None whatsoever. Mr. MURPHY. The Chair then advised you that under the rules

of the House and the rules of the committee, you are entitled to be advised by counsel. Do you desire to be advised by counsel during your testimony today?

Mr. WOODS. No, I do not. [Witness sworn.] Mr. MURPHY. Thank you. You are now under oath and subject to

the penalties set forth in Title XVIII, Section 1001 of the United States Code. You may now give a 5-minute summary of your writ-ten statement.

STATEMENT OF WILLIAM T. WOODS, DIRECTOR, ACQUISITION AND SOURCING MANAGEMENT, GOVERNMENT ACCOUNT-ABILITY OFFICE

Mr. WOODS. Thank you, Mr. Chairman, Ranking Member DeGette. It is a pleasure to be here this afternoon to talk to you


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about Healthcare.gov and the work that we have done looking into that system.

When the Web site was launched in October of last year, there were, of course, a number of problems. We got a lot of requests from the Congress to review what happened and why. Those re-quests came from both the House and the Senate, from both sides of the aisle. We got requests from committee chairs, from ranking members, from individual senators, individual congressmen across the board. And what we decided to do was to combine all of those requests and conduct a body of work that addressed all of the issues that were raised in those various requests. We have a num-ber of engagements underway to address all of those issues.

The one that we will be talking about today is contracts. But let me just mention, we have one that is nearing completion on pri-vacy and security concerns with respect to the Web site. And we also have a report that is on-track for issuance later this year on information technology management. That report will look at the use of best practices in the development of this information tech-nology system.

But I am going to be talking today about our first report that was publicly released yesterday. And that is on the contracting as-pects of Healthcare.gov. And I am going to be talking about our three objectives. The first thing we reviewed was the acquisition planning by CMS for the Web site. Secondly, we looked at the over-sight of the cost schedule and performance of that system. And then, thirdly, we looked at a range of contractor performance issues with respect to Healthcare.gov.

We focused on the largest task orders and contracts that were in-volved here. Our report mentions that CMS had spent about $840 million for development of the system. And that was through March. Obviously, the spending has continued, and that number is likely higher today. But as of the time that we completed our work, it was $840 million.

And we focused on the largest. We reviewed in depth two task orders and one contract. Just briefly, those task orders are, one, first to CGI Federal for development of the federally facilitated marketplace. That is basically the Web site itself, as well as some back office systems that support the enrollment process, the finan-cial management process, plan management, et cetera.

We also looked at a task order awarded to QSSI. And that is for the data hub. The data hub is a system that interfaces with other agencies. There are roles that other Federal agencies need to play to make this system work: the Internal Revenue Service, the De-partment of Homeland Security to verify immigration status, et cetera. So lots of agencies have a role here. And the data hub sys-tem is that system that allows for communication among all of those agencies.

And then the third contract that we looked at is one with Accenture. That was awarded on a sole source basis by CMS in January of this year for continued development of that federally fa-cilitated marketplace.

Before I get to our specific findings, I just wanted to make an ob-servation that there really are some common threads that run through all of the work that we did here. And those threads are


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first of all complexity. This was an enormously complex under-taking. As I said, there were lots of Federal agencies involved, a number of States involved, industry partners, healthcare plans. Lots of players. There were also lots of systems that had to interact with each other. And that added to the complexity. Another thread that runs through—and you will see that when we get to the find-ings in a moment—is the pressure of deadlines. The Affordable Care Act itself set January 1, 2014, as the date when the enroll-ment took effect. The Department of Health and Human Services backed up from that January deadline and set an October 1, 2013, time for when the system needed to be ready to go, when they could throw the switch, the go-live date, that sort of thing. They needed to have things in place by October 1 of 2013. And that drove a lot of the decisions that were made by CMS. And then the third thread that runs through all of our findings is the changing requirements. Things were constantly evolving, which made it dif-ficult not only for CMS personnel to keep things on track but also for the contractors to keep up with those changes. Some of those were anticipated changes, things they knew going in they did not yet know. But others were—they were learning as they went along.

Let me get into the specific findings in the three areas that I mentioned. In the area of——

Mr. MURPHY. Could you summarize, because you are already a couple minutes over? We want to ask you a number of questions, so if you could just summarize your final findings.

Mr. WOODS. Certainly. Yes. Mr. MURPHY. Thank you. Mr. WOODS. In the area of planning, our bottom line assessment

is simple yet sobering. And that is that CMS began and undertook the development of the Healthcare.gov system without adequate planning, despite facing a number of challenges that increased both the level of risk and the need for oversight.

In the oversight area, we saw increasing costs across the instru-ments that we looked at. Both of the task orders experienced cost increases, and the new contract awarded to Accenture also saw cost increases. Those cost increases were due to a number of factors. As I said, some requirements were unknown at the time they awarded these instruments. When those costs became known, when those requirements became known, the costs increased. The cost schedule and performance issues were exacerbated by inconsistent and sometimes absent oversight.

And then in the third area about contractor performance, we saw primarily in the CGI Federal task order an increasing sense of frustration on the part of CMS with the contractor’s inability to be able to comply with contract requirements and meet deliverable schedules. That frustration grew to the point where they decided not to renew the contract with CGI and instead to move to a dif-ferent solution, which is to award the contract to Accenture.

So those are our three findings. We have a series of recommenda-tions to address some of the issues. And I would be delighted to get into the specifics of that as the hearing goes forward.

[The prepared statement of Mr. Woods follows:]


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6.02

5

64


6.02

6

65


6.02

7

66


6.02

8

67


6.02

9

68


6.03

0

69


6.03

1

70


6.03

2

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Mr. MURPHY. Thank you, Mr. Woods. We appreciate your thor-oughness and your candidness.

So as you described things like inconsistent or absent oversight, you said oversight weaknesses, a lack of adherence to planning re-quirements compounded by acquisition planning challenges. And when Mr. Slavitt testified earlier, he said fortunately or unfortu-nately, the GAO report wasn’t news. So as you are going through this, with regard to the oversight, did people within CMS know that these problems were brewing?

Mr. WOODS. We saw some indication that the problems were known, particularly with the CGI issues that I mentioned earlier. That was well documented, what their concerns were. Other as-pects, though, Mr. Chairman, were not quite as visible. And let me point out one area. We found a number of instances—and our count was about 40—where changes were being made to the contract re-quirements at the direction of people that did not have the author-ity to do that.

Mr. MURPHY. Within CMS—— Mr. WOODS. Within CMS. These were largely—— Mr. MURPHY. When you say did not have the authority, you

mean they had not discussed these with Mr. Cohen or Ms. Tavenner?

Mr. WOODS. Well, the only person within CMS that has authority to change the contract in a manner that increases the Govern-ment’s obligations is the contracting officer.

Mr. MURPHY. Who was? Mr. WOODS. I am sorry? Mr. MURPHY. And who was that? Mr. WOODS. I don’t have the name right at my finger—— Mr. MURPHY. But what I am wondering here is do you know if—

so what—the problems with the Web site—it took longer to develop it. The security wasn’t a question. People had problems signing up, and with inconsistent or absent oversight. So I am wondering in some case, you are saying there was actions taken without author-ization. Several dozen of these, I believe, that you documented.

Mr. WOODS. That is correct. Mr. MURPHY. So people were making change orders, and that

was leaving some problems. But there was also absent oversight. So some people in charge were not meeting, were not paying atten-tion, were not monitoring this contract? Or they were monitoring some things and making the wrong decisions? Was it both, or one or the other?

Mr. WOODS. A combination of things. There are a number of peo-ple with different roles to play. As I mentioned, there is a con-tracting officer. But there was also, on the program side, a govern-ance board review process. And that process was designed to pro-vide high level management oversight. And what we found there was that that process simply did not work as intended.

Mr. MURPHY. Now, we also had heard that there was a McKinsey Report commissioned by then Secretary Sebelius which made it pretty clear they weren’t going to meet their deadlines. Did they know within CMS that these deadlines couldn’t be met, and that under the pressure which you had listed such as the January 1


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deadline, or the complexity of this, did they know that this really wasn’t ready for prime time?

Mr. WOODS. We found some indication in the files that we re-viewed that in the spring timeframe, the spring of 2013, that esti-mates were made that the federally facilitated marketplace would only be 65 percent complete by the October 1 deadline.

Mr. MURPHY. So they knew then in the spring. Did they know that in August and September?

Mr. WOODS. The state of knowledge continued to progress from the spring through the end of the summer. And they became in-creasingly concerned that the deadline would not be met. One of the principal oversight functions and processes that we saw, and that we were very concerned about, is there was supposed to be, according to the original schedule, an operational readiness review conducted in the spring of 2013. That operational readiness review was moved from the spring to the fall, to September of 2013, just weeks before——

Mr. MURPHY. And when they did that review, did they know it wasn’t going to work?

Mr. WOODS. Well, as I said, there was some indication in the files that they thought only 65 percent would be complete.

Mr. MURPHY. So when Ms. Tavenner—— Mr. WOODS. The purpose of that operational readiness review is

to either confirm that the system will work or find out what is wrong.

Mr. MURPHY. So when—— Mr. WOODS. So that there is enough time to fix it. Mr. MURPHY. So when Ms. Tavenner came before this committee,

or more specifically when Mr. Cohen came before this committee within days of the launch, and he said everything was going to be fine by October 1, what you are saying to this committee is there was ample evidence to say that was not true?

Mr. WOODS. We saw some indication that there was progres-sively increasing knowledge that there were problems in meeting that launch date.

Mr. MURPHY. OK. And did Mr. Cohen know that? Mr. WOODS. I don’t know that. Mr. MURPHY. But either through lack of oversight, he should

have known it, or he knew it and reported to this committee under oath that everything was fine, and August 1, it was going to be ready for launch? What you are telling us, there was ample evi-dence in what is reviewed that people within HHS knew it was not ready, and people under oath told this committee something en-tirely different?

Mr. WOODS. Yes. I don’t know what specific individuals knew or did not know. But we saw evidence in the files that we reviewed that there was a knowledge within the Agency that the operational readiness was in jeopardy.

Mr. MURPHY. Thank you. I am over time. I will now turn to Ms. DeGette for 5 minutes.

Ms. DEGETTE. Well, this is an important issue. So you are saying people within the Agency knew that the Web site was not ready, correct? Yes or no?

Mr. WOODS. We did—we saw evidence in the files——


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Ms. DEGETTE. You saw yes that people—do you think that people in the Agency knew that the Web site would collapse on October 1, yes or no?

Mr. WOODS. I can’t speak to that particular characterization. Ms. DEGETTE. You don’t have any—do you have indication from

the files that people in the Agency knew that the Web site would not work on October 1?

Mr. WOODS. Yes, we saw that. Yes. Ms. DEGETTE. Can you produce that to this committee, please? Mr. WOODS. There was a series—— Ms. DEGETTE. No, can you produce it—— Mr. WOODS. Absolutely, ma’am. Yes. Ms. DEGETTE. Thank you. Mr. WOODS. Yes, ma’am. Ms. DEGETTE. Now, my next question, because Ms. Tavenner

and Mr. Cohen did come in here and testify under oath several days before, as the chairman has said, that the Web site would work. Do you have evidence in your files that Mr. Cohen or Ms. Tavenner knew that this Web site would not work, yes or no?

Mr. WOODS. No, I cannot speak to the knowledge of any indi-vidual.

Ms. DEGETTE. Thank you. Now, in your opening statement, you talked about some provisions the GAO was coming up with to strengthen the Web site for—some recommendations for privacy and security concerns, is that correct?

Mr. WOODS. Well, this particular report that we are speaking to today just deals with the contracting aspect——

Ms. DEGETTE. Right. But you talked about—— Mr. WOODS. Not—— Ms. DEGETTE. But—— Mr. WOODS. Not for security and privacy. That—— Ms. DEGETTE. OK. So you are not looking at privacy and secu-

rity? Mr. WOODS. Other teams within GAO are looking at—— Ms. DEGETTE. Are looking—— Mr. WOODS. At that work—— Ms. DEGETTE. Are you aware of any security breaches in the

Web sites, yes or no? Mr. WOODS. No, I am not. Ms. DEGETTE. OK. Now, the GAO made five recommendations

you reference in your opening statement to CMS to avoid the mis-takes that you had identified, is that correct?

Mr. WOODS. Yes. Ms. DEGETTE. And I just want to go through those recommenda-

tions, because you said we should. And I think it is important to know. The recommendations I think are good recommendations, but they are a little vague. And so I am going to ask you about each one of them if you have specific details. But then also, I am going to ask you, Mr. Woods, to supplement your testimony and provide to this committee, and to CMS, specific details on each one of them. Because I think it is important for the CMS to actually be able to implement these recommendations. And our last witness said he agreed with the recommendations, and he did want to im-plement them.


74

The first recommendation is that CMS should take steps to as-sess the causes of the increase in cost of the continued development of Healthcare.gov and the delays in functionality of the Web site, and develop a plan to mitigate those costs and delays. Can you briefly give us a little more detail on what steps the GAO believes CMS should take to make those assessments?

Mr. WOODS. Certainly. We did see cost increases in the Accenture contract, the current contract——

Ms. DEGETTE. So what steps do you think CMS can take to rec-tify these problems?

Mr. WOODS. We think that they need to step back and identify the causes, the reasons why costs continue to increase, in that par-ticular contract.

Ms. DEGETTE. OK. And do you have any thoughts what should be included in a mitigation plan?

Mr. WOODS. They need to make sure that costs are under control, and that the schedule can be met.

Ms. DEGETTE. Yes. I think those two things are key. Now, the next thing the GAO recommends is that quality assurance surveil-lance plans and other oversight documents are collected and used to monitor contract performance. How can those documents be ef-fectively used to monitor performance?

Mr. WOODS. The quality assurance surveillance plan is a stand-ard document that is required in most efforts of this size that pro-vides a roadmap for how the Agency—any agency—is going to over-see the contractor’s performance.

Ms. DEGETTE. Right. Does the GAO have thoughts on how it can be used to do that?

Mr. WOODS. Yes, it—— Ms. DEGETTE. OK. If you can give us that information, that

would be great. Mr. WOODS. Certainly. Ms. DEGETTE. I want to go through your other recommendations

briefly while I still have time. Mr. WOODS. Certainly. Ms. DEGETTE. The GAO also recommends that CMS formalize

existing guidance of the responsibilities of personnel assigned over-sight duties. So as I understand it, the roles and responsibilities were spelled out in some way. How would formalizing existing guidance prevent confusion about the responsibilities and authority going forward?

Mr. WOODS. This gets to the issue of unauthorized individuals making changes.

Ms. DEGETTE. OK. Great. Mr. WOODS. And when they learned of that, there was internal

guidance provided to all of the people that—but that has not been institutionalized. It has not been made part of the permanent guid-ance at——

Ms. DEGETTE. OK. OK. So they already have a way they are doing it? That just needs to be formalized?

Mr. WOODS. It needs to take the next step. Ms. DEGETTE. Perfect. Now, the next thing, you recommend giv-

ing staff direction on acquisition strategies and developing a proc-


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ess to ensure that acquisition strategies are completed on time. Can you flesh that out a little bit for us?

Mr. WOODS. That was a very important deficiency that we identi-fied, is that there were a number of steps that CMS took to expe-dite the rollout of Healthcare.gov.

Ms. DEGETTE. Yes. Mr. WOODS. But each of those individual steps added risk to the

process. And the purpose of the plan, of the acquisition strategy, is to first of all identify those risks to be able to come up with a plan to address them. And we found that that acquisition strategy was not prepared.

Ms. DEGETTE. Right. So does GAO have some ideas what this process could look like if done appropriately?

Mr. WOODS. The process is already in place. Ms. DEGETTE. OK. Mr. WOODS. The regulations at HHS are very clear. Ms. DEGETTE. OK. Mr. WOODS. In fact, there is a template. It just wasn’t done in

this particular case. Ms. DEGETTE. Oh, great. So they just need to follow the existing

way. Perfect. Mr. WOODS. Exactly. Ms. DEGETTE. Last, you recommended ensuring that information

technology projects adhere to the requirements for governance board approvals before proceeding with development. What exactly does that mean? What governing board are you referring to? What are the requirements? And why did the board approval process fail the first time around with Healthcare.gov?

Mr. WOODS. Yes. The Agency had a system in place that pro-vided for an oversight board to review the progress of the system. The problem that we found is that those governance board meet-ings were held with incomplete information, and that decisions were not made as we would have expected to either approve, dis-approve, or make modifications in the——

Ms. DEGETTE. So what you are saying is once again, this was a failure to follow the existing rules that they had?

Mr. WOODS. There was a process in place. They did not follow it. Ms. DEGETTE. Thank you. Thanks for your indulgence, Mr.

Chairman. Mr. MURPHY. Yes. I now recognize Mrs. Ellmers from North

Carolina for 5 minutes. Mrs. ELLMERS. Thank you, Mr. Chairman. Thank you, Mr.

Woods, for being with us today. And as I am sitting here listening to your report findings, I am incredibly amazed by the inefficiency that went forward with a plan of action that was in place. And I keep coming up with the same question of why? Why were these steps taken? Why was action taken the way that it was? Why were there unauthorized individuals making decisions? But I think one of the most glaring questions that I have, based on your findings, is that—and you use the word that they expedite, they took meas-ures to expedite the rollout, that that added risk, obviously. And that was a failed strategy, essentially. Why in your opinion, based on your findings, did they stay with that October 1 rollout date


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when they knew, based on what I am listening to, that it was not going to be accurate and successful, and that it would be a failure?

Mr. WOODS. Well, the law itself, the Affordable Care Act, set a hard deadline of January 1, 2014.

Mrs. ELLMERS. Um-hum. Mr. WOODS. And they needed to have some period where con-

sumers could determine their eligibility, look at plan availability and make decisions about what plans they wanted to choose by that January 1 date.

Mrs. ELLMERS. Um-hum. So they stuck with the October 1 date knowing that their time was running out, so now, this is me just again trying to process why they would go forward with something that obviously was not put together well, and the steps were taken—it wasn’t an efficient system. And yet they were moving for-ward. So based on your knowledge, they had to go forward with that October 1 date so that they could have the enrollee numbers that they were looking for by January 1, regardless of the fact that it wasn’t going to work?

Mr. WOODS. That has been CMS’ position is that they needed to stick with that October 1——

Mrs. ELLMERS. So they had to stick to that date, because they needed those numbers of individuals signing up essentially, yes?

Mr. WOODS. Well, they needed to comply—to have a system in place by January 1 in order to comply with the Affordable Care Act.

Mrs. ELLMERS. Right. OK. So I am going to go back to some of the questions also on the tech surge—when the tech surge was im-plemented. To the best of our knowledge, and based on your report findings, we understand that there was a, again, tech surge in Oc-tober to fix the site after Healthcare.gov’s failed October 1 launch. Based on your investigation, what actions did CMS take in October to fix the site?

Mr. WOODS. In October, they continued to work with CGI Fed-eral.

Mrs. ELLMERS. Um-hum. Mr. WOODS. But the level of frustration reached the point in No-

vember of 2013 where they sent yet another letter detailing the shortcomings of the contractor, asking for a corrective action plan. CGI responded to that, and clearly disagreed with CMS’ assess-ment at that point.

Mrs. ELLMERS. OK. So they were disagreeing with it. So was CGI—I mean, because there were other contractors involved, too, is that correct?

Mr. WOODS. There were many other contractors involved. Mrs. ELLMERS. Yes. Mr. WOODS. Correct. Mrs. ELLMERS. OK. But particularly, it was CGI that is where

the frustration was—where the disconnect was? Mr. WOODS. They were responsible for the heart of the system,

if you will. Mrs. ELLMERS. OK. Mr. WOODS. And that is where most of the dollars were in terms

of contract expenditures.


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Mrs. ELLMERS. Um-hum. So to that point, based on the fact that CGI was the main contractor for that, were there other contracts— was their contract extended? Were there any new issued contracts based on the frustration that CMS had?

Mr. WOODS. The CGI contract had been extended earlier until February of 2014.

Mrs. ELLMERS. And that was before October 1? Mr. WOODS. I believe that was before October—— Mrs. ELLMERS. OK. So it was already extended before October 1? Mr. WOODS. That is correct. Mrs. ELLMERS. OK. Then to that point, were there any other con-

tractors that were selected, knowing that CGI was not necessarily doing what was necessary for the repair of the Web site?

Mr. WOODS. The only contract that I am aware of is the new one to Accenture to continue with development of the federally facili-tated marketplace.

Mrs. ELLMERS. Accenture. And can you refresh my memory on when that actually took place, when that new contract went for-ward?

Mr. WOODS. That was January of 2014. Mrs. ELLMERS. That was January. OK. Well, Mr. Chairman, I

have gone over on my time, and I apologize. Thank you. Thank you, Mr. Woods.

Mr. MURPHY. Thank you. I now am going to recognize the gen-tleman from Virginia, Mr. Griffith, for 5 minutes.

Mr. GRIFFITH. Thank you so much for being here today. I appre-ciate it very much.

The report indicates that CMS did not engage in effective plan-ning or oversight. What do you recommend they do in the future to make sure they have proper planning and oversight, because they apparently dropped the ball?

Mr. WOODS. They have the tools in place. Mr. GRIFFITH. OK. Mr. WOODS. One of the primary tools is a strategic plan. An ac-

quisition strategy is what it is called. There is actually a template in the HHS’ regulations for each of the areas that need to be ad-dressed. And fundamentally, it is a tool designed to identify the risks that the Agency is undertaking, and to be able to come up with a plan to be able to mitigate those risks. But they did not fol-low it. So the tools are there. They did not use the tools that were there.

Mr. GRIFFITH. Now, I might ask you an open-ended question be-cause I think it is important that we get this perspective from time to time. And that would be out of the report, what have we not asked you about that we probably should have asked you about, or the people watching this at home, something that they ought to know about your report that you haven’t already covered in your testimony here today?

Mr. WOODS. Well, one thing that comes to mind is the next en-rollment period.

Mr. GRIFFITH. Um-hum. Mr. WOODS. I think people are wondering, are we going to expe-

rience similar problems, or are we in better shape? And that is why we have one of our recommendations that is focused on the current


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contract with Accenture where we have seen some cost growth, and we think the Agency needs to make an assessment of why that cost growth has occurred, whether they are in fact on schedule, and whether there are any risks to the 2015 enrollment period.

Mr. GRIFFITH. And my hearing is not as good as it should be. You are talking about the cost growth—what was that phrase you used?

Mr. WOODS. Cost increases. We—— Mr. GRIFFITH. OK. Mr. WOODS. And we have somewhat of a disagreement with the

Agency about the term ‘‘cost growth.’’ And that is why I am reluc-tant to use it. Their position is that any cost increase since about April of this year is totally based on new requirements, so it is un-fair to call that cost growth. Our position is that when you look— before that, when they initially awarded that contract at an esti-mated value of $91 million, and now it is at 175—that the Agency needs to make an assessment about why those costs increased from the 91 to the 175.

Mr. GRIFFITH. What—— Mr. WOODS. And let me just add that may not—that is not the

end of it. That contract continues in place today. Our numbers are dated in terms of, you know, we completed our audit work a couple of months ago. So costs on that particular contract are almost cer-tainly higher today than they were at the time that we completed our audit work. And we think the Agency needs to make an assess-ment about why costs continue to grow.

Mr. GRIFFITH. Well, I think they do, as well. And I appreciate you raising that point. And it is kind of interesting, it would seem to me some of those new requirements are probably because it didn’t work the first time around, wouldn’t you agree?

Mr. WOODS. There are enhancements to the system. Mr. GRIFFITH. Um-hum. Mr. WOODS. They are constantly changing and trying to make

improvements to the system. The ones that—early on, I think you are right that those are related to the inability of the system to function as intended originally. But the Agency tells us the more recent cost increases are due to enhancements.

Mr. GRIFFITH. All right. Well, I appreciate that. And I appreciate your testimony here today. And I am happy to yield my last 55 sec-onds to whomever might want it.

Mrs. ELLMERS. I will—— Mr. GRIFFITH. Mrs. Ellmers? Mrs. ELLMERS. Thank you. Thank you. I do have one follow-up

question. And it has to do with the conversation you were just hav-ing with my colleague. When we were talking about the cost in-creases, you had mentioned that enhancements are what has been cited as the reasoning. My question for you is, did CMS get con-gressional approval for the additional funding or spending, I guess I should say?

Mr. WOODS. Yes. I am not aware of what that process was at all. Mrs. ELLMERS. So to your knowledge, and based on the report,

you did not see any effort put forward to come to Congress for addi-tional funding for spending?

Mr. WOODS. I can’t speak to that. We didn’t see it, but that wasn’t part of our review.


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Mrs. ELLMERS. OK. Thank you, Mr. Woods. And thank you to my colleague for yielding.

Mr. MURPHY. Thank you. I am going to do a second round with Ms. DeGette and I. So just as a follow-up here, are you saying that CMS is not analyzing why the contract with Accenture is growing in cost?

Mr. WOODS. We don’t think that they have done that fully yet. Mr. MURPHY. This original contract, which was a cost plus con-

tract, who signed that contract? Who is responsible for that? Mr. WOODS. Those contracts are signed by the contracting officer.

And as I said, I don’t have that name in front of me. Mr. MURPHY. Do those have to be approved by Mr. Cohen and

Ms. Tavenner? Mr. WOODS. I don’t know. Mr. MURPHY. Do you know, in their chain? Mr. WOODS. I don’t know. Mr. MURPHY. Is that something that your study encompassed to

find that paper trail or look at that? Mr. WOODS. We did not review that, no. Mr. MURPHY. Well, let me ask you too. You talked about the

pressure of deadlines, the January 1, 2014. But a number of delays were put into place, the employer mandate or the retirement issue, enforcement of canceled plans, individual mandate to the shop plan. Should the rollout have been delayed as well?

Mr. WOODS. I am not sure about that. But your observation about delays is accurate. When they realized that they would not be able to be fully functional by October 1, they did make some tradeoffs and pushed projects that they thought they were initially going to be able to complete by October 1, pushed that off into the future. And the small business program that you mentioned is one of them. The financial management module was also pushed off until a later date.

Mr. MURPHY. But none of those delays caused a delay in the Web site? Many of things that are mentioned, they didn’t cause a delay in the Web site readiness? These several dozen other changes inter-nally which were one of the factors in delay in the Web site readi-ness, though, am I correct?

Mr. WOODS. Well, the Web site was launched. I am not sure—— Mr. MURPHY. Well, you had said a number of decisions made

during I guess this 2013 to 2012, were part of the complexity that—you mentioned a couple things. One, there wasn’t proper oversight of the contract. And the second thing, a number of inter-nal changes were made by someone who didn’t have the authority to make those changes.

Mr. WOODS. That is correct. Mr. MURPHY. So do you know, or can you find out for us, in

terms of, if someone is making these changes, who approved the decision for them to these changes, or who gave that person the au-thority to be in that position to make those changes? Do you have that information?

Mr. WOODS. There are a number of people working with the con-tractors on a day-to-day basis. And the 40 instances of changes, or direction to the contractor, were made by multiple individuals. Some of these were technical people, as I said, working side-by-side


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with the contractor. Some of them were more senior officials. All of the changes though ultimately were ratified by the person with authority to do that, and that is the contracting officer.

Mr. MURPHY. But what, did it go to the level of Ms. Tavenner or Mr. Cohen?

Mr. WOODS. I don’t know. Mr. MURPHY. Is that something your records could reveal? This

is a follow-up to what Ms. DeGette was asking as well. We need to know if your records show, or if you can find out for us—I don’t think—you have an excellent investigation. But it is very impor-tant to know this, if they knew or should have known in terms of approving these changes, or being aware that the Web site wasn’t ready, or—well, just let me ask that part. Do you have any infor-mation on those?

Mr. WOODS. Well, as I said, we will certainly review our mate-rials and provide an answer to that question.

Mr. MURPHY. Because it comes to this point, this committee, members of each side of the aisle has different points of view on issues with regard to healthcare reform. That is fine. That is part of what makes our Nation great. People have differences of opinion, they move forward on that. But there are certain standards within a committee that I think we should be unified in understanding that if someone comes before this committee under oath and claims that something is ready to roll out on October 1, that everybody should be able to sign up, knowing full well that it is not, it is ei-ther incompetence, it is dereliction of duty, it is sloppiness, it is lack of supervision oversight, or it is perjury to this committee. It is perjury in terms of making a claim they know is not true, or making the claim they have no business of making. The only an-swers to questions like is the Web site ready October 1 are yes, no or I don’t know. Anything beyond that, when the claim was made by Mr. Cohen to this committee under oath that October 1, every-body would be ready to sign up, it is clear from your investigation and your testimony that people within the agencies knew it was not ready. So any information you could provide us that tells us if they knew and made false claims to this committee, or if they didn’t know and made false claims to this committee, it is impor-tant for the integrity of this committee to let us know. And if you could submit that information to this committee, I would be grate-ful, your papers and other reviews of that.

Ms. DeGette, you are recognized for 5 minutes. Ms. DEGETTE. Thank you very much, Mr. Chairman. And, Mr.

Woods, I can understand why the Chairman is concerned about this, based on your testimony today. So I want you to think very clearly about what your investigation found and what you have tes-tified to this committee today when I asked you these questions, because I don’t want the record to be confused. And I don’t want a misimpression to be left.

Are you aware of either Ms. Tavenner or Mr. Cohen coming be-fore this task committee and lying about whether they knew that the Web site was not ready?

Mr. WOODS. No, I cannot speak to that. I don’t know.


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Ms. DEGETTE. You don’t know. Do you know whether Ms. Tavenner or Mr. Cohen personally knew that the Web site was not ready, yes or no?

Mr. WOODS. No, I do not know. Ms. DEGETTE. You don’t know that. Do you know whether Ms.

Tavenner or Mr. Cohen specifically approved those changes? Mr. WOODS. No, I do not know. Ms. DEGETTE. You don’t know that either. Mr. WOODS. No. Ms. DEGETTE. Do you know who within the Agency did approve

those changes? Mr. WOODS. Ultimately, those changes were ratified and ap-

proved by the contracting officer. Ms. DEGETTE. The contracting officer. So you could give us that

information, who that was? Mr. WOODS. Absolutely. Yes. Ms. DEGETTE. Thank you very—I just think—and I know the

Chairman agrees. We don’t want to loosely be throwing around al-legations of perjury or anything else when we know—and we don’t want to put words in your mouth either. So I think we are clear on that.

There is one more thing I wanted to clarify about your testimony today. Your first recommendation that in your report on this topic, as we discussed, was take immediate steps to assess the causes or continued FFM cost growth and delayed system functionality, and develop a mitigation plan designed to ensure timely and successful system performance. Is that right?

Mr. WOODS. That is correct. Ms. DEGETTE. And that is the one you are concerned about CMS

following as they look at implementation of the 2015 program, is that correct?

Mr. WOODS. The effort that is underway by Accenture is to move the development forward to be ready for the 2015——

Ms. DEGETTE. Right. And that relates to that recommendation? Mr. WOODS. Yes, it does. Ms. DEGETTE. OK. Mr. WOODS. We think—— Ms. DEGETTE. And—— Mr. WOODS. We—— Ms. DEGETTE. What? Mr. WOODS. We think that CMS needs to make that assessment

in order to ensure itself it is on track for that enrollment period. Ms. DEGETTE. Right. For next year. Right. Mr. WOODS. Right. Ms. DEGETTE. Now, you were sitting here I believe when we

heard the testimony of the previous witness, is that correct? Mr. WOODS. Yes, I was. Ms. DEGETTE. Mr. Slavitt. And I specifically asked Mr. Slavitt if

he had reviewed the five recommendations GAO had made. Do you remember hearing that?

Mr. WOODS. Yes. Ms. DEGETTE. And do you remember hearing Mr. Slavitt say

that CMS agrees with all five of the recommendations? Do you re-member hearing that?


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Mr. WOODS. I remember hearing that, yes. Ms. DEGETTE. OK. So I would just—you know, sometimes I like

to have both the Agency witness and the GAO so that they can an-swer each other’s issues. But I just want the record to be clear that Mr. Slavitt has said that they recognize this recommendation, they intend to comply with it. And I think, Mr. Chairman, we should fol-low-up and make sure that happens. Thank you. And I yield back the balance of my time.

Mr. MURPHY. OK. Thank you. I now recognize Dr. Burgess for 5 minutes.

Mr. BURGESS. Thank you, Mr. Chairman. Mr. Woods, thank you for being here. And let me just commend the Government Account-ability Office on great work. This has not been easy, and I appre-ciate how difficult it has been to be here today. And I appreciate your forbearance.

Now, along the lines of what Ms. DeGette was just asking you, do you know whether or not the Center for Medicare and Medicaid Services is adopting your recommendations right now?

Mr. WOODS. What they told us is that they fully agreed with four of our recommendations, and they partially concurred with our fifth recommendation.

Mr. BURGESS. Have you any evidence that you can point to that shows that in fact they are taking steps to comply with four of those recommendations?

Mr. WOODS. We have seen some indication—— Mr. BURGESS. Well, you have their assurances, but is there any-

thing that you can point to in data and fact that they are taking those recommendations?

Mr. WOODS. What they told us is that they are providing addi-tional training in certain areas that they plan to implement those recommendations. We are hopeful that they do. We have a normal regular process for following-up with agencies to make sure that if they tell us that they are going to implement recommendations that they in fact do so.

Mr. BURGESS. OK. Mr. WOODS. So that process will continue at GAO. Mr. BURGESS. Well, and I look forward to the follow-up hearing

we have about that implementation. Now, you know, a lot was written in August of 2012 about CMS’

or HHS’ lack of production on rulemaking as it related to the es-sential health benefit. And, in fact, that rulemaking was delayed. The rule actually came out about a week after Election Day that year. I don’t know if you recall that. In your work, was there any evidence that that delay was politically motivated? Or am I just being overly sensitive and overly cynical by the rule coming out a few days after Election Day 2012?

Mr. WOODS. We found no indication of that, sir. Mr. BURGESS. So your inference is I am being overly cynical? Mr. WOODS. We found nothing to point us in that direction. Mr. BURGESS. Well, let me just point out to you, why—on this

committee, it has come up several times today. I mean, Mr. Cohen was here. I think it was about 10 or 11 days before October 1. And I asked him a very direct, very specific question. In fact, I tried to do a John Dingell and said yes or no, the Web site will be ready


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on October 1? He gave me what I presumed to have been a well- rehearsed and studied answer, because he repeated it verbatim twice. And it essentially said on October 1, consumers will be able to go online, see premium net of subsidy, and make their purchase. Now, as we know, that didn’t actually turn out to be the case. So it is a valid question to ask. He must have known that 10 days be-fore the launch date, because it sounds like from your report that it was pretty clear that things weren’t going well. Am I wrong about that?

Mr. WOODS. I simply can’t speak to what he knew or didn’t know at any particular point in time.

Mr. BURGESS. Well—— Mr. WOODS. But I can say that we found indications in the docu-

ments that we reviewed that the system was projected to be only 65 percent complete by that October 1 deadline.

Mr. BURGESS. If you had been sitting here and asked that ques-tion, and reminded that you were under oath, would you have an-swered it the same way Mr. Cohen did?

Mr. WOODS. I can’t really respond to—— Mr. BURGESS. Well, let me ask you this, because you have got

written in your report, as the October 1, 2013, deadline for estab-lishing enrollment through the Web site neared, CMS identified significant performance issues involving the FFM, the Facilitated Federal Marketplace, contractor. But the Agency took over only limited steps. Can you provide for the committee what correspond-ence, what evidence, what documents you relied upon to come to that conclusion, to make that statement?

Mr. WOODS. Absolutely. We can summarize what led us to that conclusion. And we would be happy to do that.

Mr. BURGESS. As a part of making this statement, did you have access to internal emails within the Center for Consumer Informa-tion and Insurance Oversight at CMS?

Mr. WOODS. We reviewed lots of documents, contract documents, emails, memos. So we had very good access to lots of information from CMS.

Mr. BURGESS. And I appreciate that. I would simply ask that that access be made available to this committee, the documents, the emails, the transcripts that you have, would make that avail-able to our subcommittee, for the staff——

Ms. DEGETTE. Mr. Chairman, I believe we already have that in-formation in this subcommittee.

Mr. MURPHY. Well, let us find out. Ms. DEGETTE. It has been produced already. Mr. BURGESS. Again, I would ask that we be certain that you

have produced the information the subcommittee staff is asking for. Mr. WOODS. We would be happy to work with the committee on

that. Mr. BURGESS. And let me just ask you one last thing. In your

opinion, is the Web site—open enrollment period this time is going to be much shorter than last time—in your opinion, are they going to be ready for the second open enrollment period?

Mr. WOODS. I am not in a position to make that judgment. That is why we had the recommendation that we did is that we think


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CMS needs to make that assessment of cost and schedule to make sure that they are on track.

Mr. BURGESS. Because there is the possibility they would not be able to meet that?

Mr. WOODS. We said in the report that the risk is that there could be some impact on the 2015 enrollment period, and that is why we had the recommendation that we did.

Mr. BURGESS. OK. And I thank you for your answers. Mr. MURPHY. The gentleman’s time has expired. Mr. BURGESS. And I thank you for being here. I yield back. Mr. MURPHY. Thank you. I ask unanimous consent that the

member’s written opening statements be introduced into the record. And without objection, the documents will be entered into the record.

Mr. Woods, I want to thank you for your thorough and candid GAO report. All this committee requests is honesty, thoroughness, and details. And GAO’s reputation as a nonpartisan investigative report organization is based on that ability to honestly and thor-oughly provide the truth to a candid world. So we appreciate that.

Members will have several questions for follow-up. We do ask that you respond to them in a quick manner. We also ask your commitment that you will share your work with our majority and minority staffs, so they can also review them with you and get other details.

So in conclusion, I would like to thank all the witnesses and members that participated in today’s hearing. In remind members they have 10 business days to submit questions for the record.

And with that, I adjourn this hearing. [Whereupon, at 12:53 p.m., the subcommittee was adjourned.] [Material submitted for inclusion in the record follows:]


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